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3 China Stocks to Buy Before They Make a BIG Comeback

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Donald Trump's election victory has proved to be a major shot in the arm for most American stocks, but it certainly hasn't helped China stocks. Trump's platform of deregulation and tax cuts may result in a significant boost to U.S. corporate earnings. On the other hand, Trump has had consistently harsh words for U.S. international trading partners, specifically China and Mexico.

3 China Stocks to Buy Before They Make a BIG Comeback

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Trump has accused China of "robbing Americans of billions of dollars of capital and millions of jobs." He has also threatened to impose a 45% tariff on imported Chinese goods. Is Trump more bark than bite when it comes to China?

That remains to be seen.

Understandably, many U.S.-listed Chinese stocks haven't participated in the post-election rally. Trump may prove to be an unpredictable complication for Chinese companies in the near-term. But long-term investors can take advantage of the rare opportunity to buy some quality stocks following significant pullbacks. There are plenty of Chinese stocks that make fine long-term investments, and investors should buy the Trump-fueled dip.

With that as a backdrop, here are three china stocks to buy on this dip.

China Stocks to Buy on the Dip: Baidu Inc (ADR) (BIDU)

China Stocks to Buy on the Dip: Baidu Inc (ADR) (BIDU)

After dropping more than 5% immediately following the U.S. election, Baidu Inc (ADR) (NASDAQ: BIDU ) is now only down 0.4% since Nov. 8. Since Trump's victory, the "Chinese Google" has held up fairly well compared to the actual Google: Alphabet Inc (NASDAQ: GOOG , NASDAQ: GOOGL ) is up only 0.3% since Election Day.

BIDU is the top search engine in China, but there's a strong argument that the stock is a better investment than its American counterpart. Incredibly, the internet penetration rate in China is still only around 50%. That leaves plenty of opportunity for future growth.

In addition to its dominant position in the Chinese internet space, Baidu has a number of potential long-term growth sources. BIDU owns the second-largest video player in China, iQiyi. The company has also invested heavily in artificial intelligence technology as well.

For Americans, Tesla Motors Inc (NASDAQ: TSLA ) is the leading brand when it comes to driverless cars. Morgan Stanley now expects the Tesla Model 3 to begin shipping in late 2018. In China, BIDU expects to have its own driverless car on the market in 2018 as well.

When it comes to large-cap China stocks, Baidu is certainly one of the best long-term investment options. Now's the time to buy the dip in BIDU.

China Stocks to Buy on the Dip: Alibaba Group Holding Ltd (BABA)

Why Alibaba Group Holding Ltd (BABA) Stock Is a Survivor

The downside is, a big chunk of Alibaba stock was built on sales of low-cost counterfeit goods. On balance though, there's not quite as much risk to BABA stock in the company's newest position on fakes.

Alibaba Group Holding Ltd (NYSE: BABA ) has its finger on the pulse of two of the fastest-growing segments in technology: e-commerce and cloud services.

Those segments are the reason why a company the size of BABA has somehow managed to accelerate its revenue growth in recent quarters. After three straight quarters of revenue growth in the 26% to 28% range, BABA has delivered revenue growth of 33%, 48% and 47% in the past three quarters.

Much like Amazon.com, Inc. (NASDAQ: AMZN ) in the U.S., e-commerce should provide steady long-term growth for BABA. However, the company's cloud services segment is growing faster than any other company's in the world, including AMZN.

In many ways, Alibaba stock is a bet on the Chinese economy. Despite Trump's tariff threats, Societe Generale recently upgraded Chinese stocks from "Underweight" to "Overweight." The firm believes all emerging market economies will benefit from U.S. economic growth under Trump.

Boston Consulting Group projects China's economy will grow by $2.3 trillion from 2016 to 2020. BABA stock is the best way for U.S. investors to get exposure to that astounding growth.

China Stocks to Buy on the Dip: Melco Crown Entertainment Ltd (ADR) (MPEL)

China Stocks to Buy on the Dip: Melco Crown Entertainment Ltd (ADR) (MPEL)

I will start off by saying that (NASDAQ: ) is much more of a wildcard than BABA stock or BIDU stock.

I will start off by saying that Melco Crown Entertainment Ltd (ADR) (NASDAQ: MPEL ) is much more of a wildcard than BABA stock or BIDU stock.

MPEL is the only U.S.-listed Chinese company that is licensed to operate casinos in the world's largest gambling destination: Macau, China. Gambling is illegal in mainland China, but it is legal in Macau.

In 2014, the Chinese government decided it was going to crack down on money laundering in Macau. Macau's VIP gaming revenue subsequently plummeted as Macau high-rollers opted to avoid Macau all-together. After more than two years of declining gaming revenues, Macau recently put together four consecutive months of positive gaming revenue growth.

In that four-month stretch, MPEL stock was up 37%. However, just this week , casino operators received bad news that the Chinese government is now ramping up its regulation of Macau by slashing daily ATM withdrawal limits by 50%. The new rule goes into effect immediately and is intended to reduce currency outflow.

It seems as if there has been some nefarious activity in Macau in recent years in addition to gambling. However, Las Vegas had a long history of nefarious activity prior to the modern era of massive growth.

MPEL stock sold off by more than 13% on the day that China announced the new ATM restrictions. If investors ignore the noise and focus on the long-term secular growth potential of the legitimate gambling market in Macau, Melco stock is the only U.S.-listed pure play on Macau. The stock is worth a long-term bet, especially following the double-digit sell-off.

As of this writing Wayne Duggan was long BABA and MPEL stock.

The post 3 China Stocks to Buy Before They Make a BIG Comeback appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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