Trading Nation

One Chinese stock is the best bet as its economy rebounds, traders say

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Trading Nation: Chinese stocks outperform

The Chinese economy appears to be on the road to recovery.

China's official GDP figures released overnight Wednesday showed its economy grew by 3.2% in the second quarter from a year earlier, rebounding from a 6.8% contraction in the first quarter.

Chinese stocks are also taking off. Large-cap China names as measured by the FXI ETF are up 7% so far this month, roughly double the gains of the S&P 500.

Delano Saporu, founder of New Street Advisors, said one of those stocks is poised for even more gains.

"I really believe in Alibaba," Saporu told CNBC's "Trading Nation" on Wednesday. "We're looking for insulation from the broader macro level events. And Alibaba provides that with their strong e-commerce strategy and we think that can continue. … We believe in sticking with that strength."

Alibaba shares are up 14% this year, while the FXI ETF and S&P 500 both remain negative. The stock hit an all-time high a week ago.

Mark Tepper, president of Strategic Wealth Partners, is bullish on Chinese stocks more generally. He holds the KWEB Chinese internet ETF to take advantage of strength in the group.

"I think a lot of that [strength] has to do with the Covid narrative. It is front and center right here in the U.S. and people are afraid. You barely hear about it in China and I'm not saying it's not as bad there, I'm just saying you don't hear about it," he said during the same segment.

Tepper agrees with Saporu that Alibaba is best in class.

"There's no doubt that China's middle class is growing and I think Alibaba really is the best way to play it. We own the company, not just for e-commerce but also for the cloud, food and grocery delivery," said Tepper. "What you're getting with Alibaba is you're getting a diversified play in a growing economy."

He adds that Alibaba looks cheap compared with its American counterpart Amazon. Alibaba trades at 26 times forward earnings; Amazon has a 102 times forward multiple.

Disclosure: Strategic Wealth Partners holds Alibaba. New Street Advisors holds Alibaba. 

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