Buy 5 China Stocks To Tap The Country's Recovery From Coronavirus

The fast-spreading novel coronavirus outbreak has triggered an unprecedented sell-off in equities and bonds. Stocks are being clobbered, major indices are crashing regularly, while oil has plunged to lowest levels in 18 years. Global efforts to combat the pandemic’s impact and rev up economic activity have largely failed so far.

Also known as Covid-19, the deadly virus has so far infected more than 4,00,000 people and killed in excess of 18,000 worldwide. It has grounded flights, halted road travel and shut down industrial activity.

Some experts warn that economic damage from the coronavirus crash is more severe than the 2008-09 financial crisis and the biggest since 1929-30 economic recession. The uncertainty has led to large drops in the market, triggering a circuit breaker — a safeguard that halts trading for 15 minutes — in the United States for an unprecedented four times in March alone. The last time such a tool was enforced was back in 1997.

Amid all this panic in the global market, there has been one exception. It is China, the epicenter of the outbreak.

China Situation Stabilizing

In contrast to the decimation across the world markets, the source country’s benchmark — Shanghai Composite Index (‘SCE’) — has held up pretty well. The SCE, with a year-to-decline of just 9% (as of Mar 24, 2020), has outperformed the broader S&P 500 market’s return of -25% by a wide margin.

The worst seems to be over for China, which has seen its daily number of new infections drop substantially. Agreed, Beijing is yet to get back to normal business with the service and manufacturing sectors hit hard. However, the country’s Central Bank has rolled out certain policy measures that look like gaining traction.

In early February, The People's Bank of China, or PBOC, injected RMB 1.2 trillion ($173 billion) of liquidity in markets. Other instruments to counter coronavirus’ economic blow include the lowering of lending rates, cutting bank reserve ratios and handing out cheap lending to select entities.

The stimulus initiatives have helped the world’s second-largest economy contain its stock market losses and lend some investor optimism. While the contagion will hurt China’s first-quarter GDP growth in all probability, government stimulus measures will most likely aid the coronavirus-hit economy recover in the subsequent quarters. In other words, as of now, China seems to be financially the best placed of all countries affected by the novel coronavirus pandemic. Further, the country has asserted its capacity for further action that might see trillions more being pumped into the economy.

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Our Choices

Market watchers and experts feel that with Chinese economy expected to recover lost ground ahead of others, the time may be ripe to pick some stocks from the country with strong fundamentals. While adding these stocks to your portfolio looks prudent, picking winning stocks may be difficult.

Here, Zacks’ proprietary methodology comes in handy. Our research shows that stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer good investment opportunities. You can see Zacks Investment Research

Written By: Zacks Investment Research