Alibaba, Tencent likely winners in Chinese stock market, JPMorgan AM says

Tourists watching the bull statue in front of the Stock Exchange on the Bund, Pudong skyline in the distance, Shanghai, China.
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Chinese stocks are far from reaching their peak anytime soon but there are some bright spots around on the mainland, according to the chief investment officer and head of emerging market and Asia Pacific equities at JPMorgan Asset Management.

Richard Titherington told CNBC's "Squawk Box" on Wednesday certain technology and industrial companies could be a good bet for investors in an environment, where the outlook for China remains uncertain.

"I think the growth companies, the Alibabas and the Tencents of this world, (will) continue to do well," said Titherington.

Alibaba has been steadily diversifying its business, making strides in new areas such as cloud computing.

In the quarter that ended Sep. 30, Alibaba reported cloud revenue that climbed 130 percent on-year to $224 million, with growth outpacing that witnessed by the likes of more established cloud players Microsoft, Google and Amazon.

Titherington added that industrial companies that operate in manufacturing and were domestic-facing, could also stand out. Activity in China's manufacturing sector expanded in December according to private and official surveys, pointing to signs of stabilization.

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To be sure, China has been steadily pivoting away from manufacturing toward the services sector, which include consumer industries such as real estate, retail and leisure.

Certain sectors of the Chinese economy remain under pressure as a result of a weakening currency and fresh concerns over capital outflows, which officials have been struggling to contain.

Titherington, as well as other experts, however, do not anticipate an imminent financial collapse in China, which is still growing at more than twice the rate of the global economy. However, he added, "The currency is likely to continue to weaken."

Both the onshore and offshore have seen a fair bit of volatility in recent weeks. Onshore, the dollar received as little as 6.8679 yuan late last week, dropping from levels as high as 6.9603 yuan.

In offshore trade, the yuan traded as high as 6.7815 late last week, amid a spike in overnight borrowing and deposit rates, from levels as low as 6.9872 early last week.

Unexpected moves in the yuan could put Chinese policymakers in a bind. A substantially weakening yuan could prompt a retaliatory response from the U.S., as President-elect Donald Trump previously threatened to punish China for manipulating its currency by imposing tariffs on Chinese goods sold stateside - due to exchange rate conversions, a weak yuan would make Chinese goods cheaper and more competitive abroad.

— Leslie Shaffer contributed to this report.

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