Morgan Stanley picks out high-conviction China stocks

Published Mon, Aug 30 20218:01 PM EDT

Evelyn Cheng @in/evelyn-cheng-53b23624 @chengevelyn

In Morgan Stanley strategists' selection of 30 high-conviction Asia-Pacific stocks, they found a number of Chinese stocks listed in Hong Kong and the mainland. Five of these are all rated "overweight" by the investment bank. But the strategists' model for finding the level of conviction analysts have on a stock goes beyond just buy ratings. To the strategists, simply looking at stock ratings or price targets can distort from the underlying picture. Instead, they said it's the range and pace of analyst revisions on indicators like earnings forecasts, ratings and price targets that can illuminate winners. Here are five of their model's highest conviction picks for China for August: Cosco Shipping Holdings Cosco Shipping is one of China's state-owned giants that generates a significant portion of revenue outside of the country, and now operates in the midst of global shipping congestion that has sent cargo costs soaring. In July, Cosco management forecast the company would report net profit attributable to shareholders of 37.02 billion yuan ($5.7 billion) in the first half of this year. That would be far above the 882 million yuan reported for the same period in 2020, and the 1.16 billion yuan for the first half of 2019. While the company has yet to officially release those results, its shares have doubled in value this year and are up nearly 30% in August alone. Li Ning Chinese athleticwear brand Li Ning has ramped up not only its offerings in sneakers but also apparel — a segment that exceeded footwear in revenue by about 100 million yuan in the first half of the year. In mid-August, the Hong Kong-listed company reported net profit attributable to shareholders surged to 1.96 billion yuan in the first half of the year, up sharply even from the 795 million yuan disclosed for the same period in 2019. Shares are up more than 20% this month, for gains of about 90% so far this year. Anta Sports Rival Chinese athleticwear brand Anta has not done as well as Li Ning in terms of stock performance. Shares are down 6% for August, for gains of nearly 30% for the year so far. But the company makes more money for investors. Anta reported net profit attributable to shareholders of 3.84 billion yuan in the first six months of the year, up from 2.48 billion yuan during the same period in 2019. Wanhua Chemical Group Wanhua Chemical is a state-owned chemicals supplier for products ranging from furniture to electrical appliances, according to the company's website. Wanhua is based in the northern province of Shandong but claims to have research and development centers in North America and Europe. The company reported net profit attributable to shareholders of 13.5 billion yuan in the first six months of the year, versus 5.62 billion yuan during the same period in 2019. Shares are down 6% for August, but are up nearly 19% for the year so far. Zhuzhou Kibing Kibing , a manufacturer of window panes and other glass, has seen revenue surge over the last two years despite the pandemic. The company reported net profit attributable to shareholders of 2.19 billion yuan in the first half of the year, versus 518 million yuan during the same period in 2019, prior to the pandemic. The stock has more than doubled so far this year, and is up 35.6% for August so far. — CNBC's Michael Bloom contributed to this report.

An investor sits in front of a board showing stock information at a brokerage office in Beijing, China.

Thomas Peter | Reuters

In Morgan Stanley strategists' selection of 30 high-conviction Asia-Pacific stocks, they found a number of Chinese stocks listed in Hong Kong and the mainland.

Five of these are all rated "overweight" by the investment bank. But the strategists' model for finding the level of conviction analysts have on a stock goes beyond just buy ratings.