In September, keep a watch on two Chinese stocks.

In September, keep a watch on two Chinese stocks.

Investing in Chinese stocks is a risky proposition given the current state of affairs in China. The government’s crackdowns, the cancellation of initial public offerings, and the tightening of regulations are all alarming. Regulatory bodies have recently chastised ride-hailing apps for using unqualified drivers and misleading advertising.

There are also concerns that Chinese accounting standards are not as thorough as those in other nations, posing a greater risk of fraud, as illustrated by the demise of Luckin Coffee. As a result of these limitations, it’s probable that Chinese businesses will be barred from trading on US stock exchanges.

On the other hand, the fear-induced anxiety in market sentiment creates an opportunity to buy companies with outrageously low values and already stable fundamentals. Alibaba ( NYSE: BABA ) and Tencent Music ( NYSE: TEN ) are two Chinese stocks to watch this month ( NYSE: TEN ). The stock ( TME ) is listed on the New York Stock Exchange.

Alibaba

Alibaba, the world’s ninth-largest firm by market value, is an easy target for Chinese regulators, and the Ministry of Transportation recently chastised its AutoNavi ride-hailing app. In April, regulators imposed $2.75 billion in penalties for antitrust violations. Given the stock’s significant drop this year—over 27%—it’s important emphasizing that the company’s financial results remain solid.

Alibaba’s revenue has been rising year after year for more than a decade, reaching $109.4 billion in fiscal 2021, a 41 percent increase. Except for 2017, net income has steadily increased year after year. The company effectively weathered the worst of the pandemic last year, with sales of $21.8 billion, up 2% from the previous year.

The present crackdown has little impact on the company’s activities. Revenues of $31.8 billion were recorded in the first quarter of fiscal 2022, a 34 percent increase over the same period last year. Year over year, the company’s net income dropped only 8% to $6.6 billion.

His company is well-liked by investors. Alibaba, for example, has launched a $15 billion share repurchase program that will last until 2022. Management has also committed $15.5 billion to technical innovation, economic development, high-quality jobs, and the care of vulnerable populations and the establishment. The concept didn’t go down well with investors, and Alibaba’s stock fell by $6 the day it was announced, but it may have helped the company’s standing with Chinese regulators.

Alibaba has a high price-to-earnings ratio, although it has a price-to-earnings ratio of 21.1 in the last few months, which is more in line with the company’s historical valuation.

Tencent

In September, keep a watch on two Chinese stocks.

With a market valuation of $7 billion, Tencent Music is the world’s sixth largest firm. Instead of music streaming, it provides online gaming, financial services, and controls the Chinese messaging app WeChat. Tencent, like Alibaba, has found itself in the crosshairs of Chinese regulators, with its stock price plummeting by 55 percent this year.

Tencent was fined $77,150 (less than a dollar) in July for failing to properly record the purchases of two apps, Kuwo and Kugou, and was warned it would have to give up exclusive rights to a number of record labels.

This is unlikely to affect Tencent’s profits. Like Alibaba, Tencent already dominates and has a strong market position.

The corporation generated $42.3 billion in sales in the first half of the year, up 23% over the same period last year, and $13.2 billion in net income, up 17%. Financial technology and business services grew the most in the second quarter, with sales of $6.5 billion, up 40% from a year before. The company credits its success in this area to the explosive expansion of digital payment transactions, which shows no signs of slowing down.

Tencent has expanded its net profits and revenue year after year for more than a decade. Every quarter since 2010, it has increased revenue. While the company’s growth rate is slowing, it will be difficult to bring it to a halt.

The best option for your risk tolerance

China’s government isn’t exactly kind to multinational corporations these days. Even the most seasoned long-term investors are at risk in China since it is hard to forecast the actions of regulators. Tencent and Alibaba, on the other hand, are likely to continue their supremacy based on market share and preliminary data.

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