The Chinese stock market is brimming with exciting growth prospects, but also fraught with a number of pitfalls. This makes the case for investors to consider top Chinese stocks to sell in 2024. China’s economy saw a modest post-pandemic recovery, and reported GDP growth of 5.2% in 2023.
However, the IMF projects growth to be much slower in 2024. Some of the risks weighing on the economy include the country’s aging population, declining labor productivity, and weak business confidence. Additionally, China’s property sector crisis sparked by the 2021 default of Evergrande Group is still an ongoing concern.
While some Chinese companies boast established track records, an overwhelming majority of them have been a money pit for U.S. investors. Parting ways with these companies will be paramount as a U.S./China sanction battle may be underway.
Now, let’s discover the Chinese stocks to sell as risks emerge in 2024!
Nio (NIO)
Nio (NYSE:NIO) stock made a comeback in the past week but their underlying fundamentals have not changed. The company’s long term growth prospects remain questionable, and current headwinds in China’s economy will lead to slower growth in 2024.
The Chinese electric automotive industry remains highly competitive, and Nio is at the bottom of the totem pole. They continue to face immense pressure, especially from industry leaders like Tesla and BYD. Moreover, Nio continues to lose billions per quarter with no signs of profitability in sight. Investors have continued to bet on a turnaround, but tougher times are likely ahead. This is because the broader EV market is anticipating slower growth in 2024.
What is even more concerning is the large amount of institutional investors dumping shares in 2023. For example, Ballie Gifford sold off nearly 84% of its stake in Q4 2023. With operating losses expected to continue, Nio remains one of the top Chinese stocks to sell before things get worse.
Bilibili (BILI)
Bilibili (NASDAQ:BILI) is a popular video-sharing app in China catered towards the Gen Z population. They have seen meaningful top line growth since their IPO in 2018, but have suffered from staggering operating losses on the back end.
Bilibili has garnered a loyal user base with its focus on animation, comics, and gaming content. The company derives a majority of its revenue from online advertising. However, they have faced challenges in monetizing their user base effectively and depend heavily on user-generated content. This dependence on its platform’s offerings presents a unique challenge as China’s economy is headed for tougher economic conditions. In FY23, revenue rose modestly by 3% to $3.2 billion.
While advertising revenue saw double digit growth from the year prior, net loss was $677.7 million. There doesn’t seem to be any unique value proposition for the business, and investors are better off selling shares and parking their money elsewhere.
Sohu (SOHU)
Sohu (NASDAQ:SOHU) is a diversified Chinese internet company offering advertising, a search engine, and other online services. The company has seen a deceleration in revenue growth in the last 2 years, and 2024 will be equally as challenging.
Sohu is a notable Chinese internet company founded in 1996. Their core businesses, such as its Sogou search engine, have experienced declining user engagement and advertising revenue. The company has struggled to innovate and adapt to changing consumer preferences that favor mobile apps and social media platforms. Furthermore, their overreliance on their core business offerings has been a large contributor to their declining advertising revenue.
In FY23, revenue declined 18% YOY to $600 million. Advertising revenue also saw a major slump, down 14% compared with 2022. While Sohu is developing a long and short form content strategy, they will have a difficult time competing with giants such as TikTok. Growth in 2024 also does not look too promising, as the company looks to revamp their business strategy. This makes Sohu stock one of the best Chinese stocks to sell in 2024.
On the date of publication, Terel Miles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
