Moments after the Chinese Communist Party’s 19th National Congress, president Xi unveiled his new team to the media and the world.

Apart from the new team, president Xi also shared his new vision for China: To be a top innovative nation by 2035.

During the congress, president Xi also made known his desire to create a better China, not just for the rich but also for the poor.

Given the direction that China is moving towards, here are five Chinese stocks that you should own as an investor.

1. China Mobile (CM)

As the first 4G service provider with the largest network coverage, MBKE views CM as the best 4G play in China.

The current low data usage indicates future growth potential, especially in China where internet usage is growing exponentially.

According to Maybank Kim Eng Research (MBKE), CM is currently trading at an inexpensive valuation considering its potential for a “long-term capital return story and profit growth.

MBKE: China Mobile Limited (HKG: 0941) – BUY; HK$105.00

2. China YuChai International (CYC)


As a market leader in China’s bus engine supply niche, CYC develops and manufactures light, medium, and heavy-duty engines for a wide variety of vehicles.

CYC holds a dominant position in its niche with over 50% share of bus engine sales volume in 2016.

CIMB Research expects the upgrading of national emission rules could lead to shorter engine replacement cycle and front-loading of demand.

Furthermore, the engine manufacturer should see more growth opportunities in the industrial and transport machinery space on the backdrop of the One Belt, One Road (OBOR) initiatives.

CIMB Research: China YuChai International Limited (NYSE: CYD) – BUY; US$30.53

3. Health & Happiness International (H&H)

As H&H didn’t benefit much from the recent round of sector-wide re-rating, MBKE thinks the market has not accurately valued its two businesses.

The lifting of China’s one-child policy in Nov 2015 is set to see a new era of increasingly more newborns from 16 million per year in 2010-2015 to 18-20 million per year in 2020-2025.

Moreover, the growing middle class and as a result, overall consumption, has been steadily building demand for H&H’s products, particularly the premium tiers.

The more crucial point to note is the growing market size but decreasing number of players, giving the remaining players including H&H more room for top and bottom line expansion.

MBKE: Health & Happiness International Holdings Limited (HKG: 1112) – BUY; HK$57.10

4. Xiabu Xiabu Catering Management China Holdings (Xiabu)


Xiabu is on the verge of achieving the 100-store mark for its Xiabu brand and more than ten new stores for its Coucou brand.

The Chinese love all forms of hotpot and as the economy moves towards “greater domestic consumption-driven growth”, more Chinese would opt for eating out instead of cooking at home.

UOB Kay Hian Research (UOBKH) also points out the opening of upcoming Coucou restaurants should expand Xiabu’s already significant presence.

UOBKH: Xiabu Xiabu Catering Management China Holdings Corporation Limited (HKG: 0520) – BUY; HK$13.88

5. Gree Electric Appliances (Gree)

According to Euromonitor, Gree holds a 37% market share in the Chinese air-conditioner market, with only a few foreign or small local competitors trailing behind.

Gree’s focus on strengthening its dominant position since more than a decade ago allowed a steady net profit growth of 20% per annum from 2004 to 2014.

That said, the air-conditioner leader is exploring new areas of growth, diversification opportunities and even has M&A initiatives in the pipeline.

UOBKH favours Gree for its track record of paying meaningful dividends while maintaining a robust balance sheet and healthy cash flow, with a promising dividend growth trend even in the near future.

UOBKH: Gree Electric Appliances Inc. of Zuhai (SHE: 000651) – BUY; RMB$49.00

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