HSBC names 2 China stock picks for 2025 — and gives one over 70% upside
Chinese markets are “turning a corner” following a series of government stimulus measures , HSBC said, naming its top stock ideas for 2025. “Mainland China has announced a slew of policies to help ensure that local governments can pay their bills and service debt. This should reduce the risk of an immediate slowdown in growth in mainland China and the market has so far reacted positively to these initiatives,” the investment bank’s analysts wrote in a Nov. 19 research note. Here are two of the stocks HSBC likes: KE Holdings HSBC is bullish on real estate player KE Holdings (or Beike), and considers it a key beneficiary of “China’s 2025 inflection point.” The stock is “set to benefit from a pick-up in sales volumes and potential home price stabilization in 2025,” HSBC Global Research’s Asia Real Estate analyst Oliver Yu said. KE Holdings “has the highest earnings sensitivity to a recovery in property sales in both the primary and secondary markets,” he added. HSBC’s optimism comes as the real estate sector shows signs of stabilization after lingering in the doldrums for the past year. Goldman Sachs, Morgan Stanley and more have all said they expect China’s property market to bottom in the second half of next year. His comments come as Microsoft’s fiscal first-quarter results surpassed Wall Street’s expectations , with earnings per share coming in at $3.30 — compared to the $3.10 expected — while revenue hit $65.59 billion, versus the anticipated $64.51 billion. KE Holdings’ third-quarter results fell short of Wall Street’s expectation – with adjusted earnings per ADS coming in at 1.53 Chinese yuan ($0.22) – compared to the 1.57 Chinese yuan expected – while revenue hit 22.6 billion Chinese yuan, versus the 23.46 billion expected. Looking ahead, Yu sees KE Holdings’ profits expanding as it gains market share and sees rapid expansion of its new home renovation and rental services businesses. KE Holdings’ shares are listed on the Hong Kong Exchange and trade as an American Depositary Receipt (ADR) in the U.S. under the ticker BEKE . HSBC has a target price of $34.30 on the stock, implying about 71.7% upside potential. Hongfa Technology HSBC is also bullish Hongfa Technology and has a target price of 48.10 Chinese yuan ($28.30) on the stock, giving it around 50% upside. Calling the stock “a leading manufacturer of industrial automation equipment, solar inverters, electrical relays, and other automotive components,” HSBC considers it one to play the structural growth in mainland China. Corey Chan, head of A-share industrials and renewables research at HSBC Qianhai Securities, expects the company to benefit from the use of modularization — or the breaking down of systems into smaller parts — especially by OEMs, or original equipment manufacturers, in the auto industry. “Hongfa is well positioned to benefit, given its market leadership in auto relays and its ability to supply a wide range of other auto components, including connectors, film capacitors, inductors and fuses,” Chan explained. Shares in Hongfa are listed on the Shanghai Stock Exchange and also trade in the iShares Global Tech ETF (18.7% weight) and Fidelity MSCI Information Technology Index ETF (17.2%). — CNBC’s Michael Bloom contributed to this report.
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