The steep selling in U.S. markets has felt relentless in the first half, and even the best Asian stocks got caught in the tide.
Despite already falling into a bear market territory, the U.S. indices still trade above fair value. When considering interest rates have further risen as the Federal Reserve battles rampant inflation, investors should diversify geographically. And the best Asian stocks, already at a deep discount, also have strong growth prospects ahead.
Technology stocks have the best prospects in Asia. In China, Alibaba (NYSE:BABA) is among the most widely followed e-commerce firms. JD.com (NASDAQ:JD) is a solidly run online retail firm, too. In the stock trading segment, Hong Kong-based Futu Holdings (NASDAQ:FUTU) is a potentially growing firm. In Singapore, the online retailer and gaming firm Sea (NYSE:SE) is popular.
In South Korea, Coupang’s (NYSE:CPNG) e-commerce business is expanding into food delivery, while Metaverse platform WiMi Hologram Cloud (NASDAQ:WIMI) and video sharing company Bilibili (NASDAQ:BILI) is focused on a young and growing audience.
Alibaba Group Holding (BABA)
After a lengthy span when regulators were unwilling to approve new mobile games as the government heightened its scrutiny against gaming firms, China has finally approved 60 domestic games. This is a turning point. Investors reacted by buying shares of Alibaba, which has a gaming segment.
In the fourth quarter, Alibaba posted a 9% growth in revenue, to $32.19 billion. Its business benefited from a 29% year-over-year growth in the local consumer services unit. The company added 28.3 million annual active customers, to 1.31 billion users. The company reversed its losses and posted income from operations of $11 billion.
In the second half of the year, Alibaba needs a sustainable and robust supply chain. If it gets its logistics in place, its merchants may meet the growing consumption rebound.
Bilibili is a video service provider for a young audience in China. The company posted first-quarter losses of 66 cents a share. Revenue rose by 30% Y/Y to $797.3 million.
After China lifted its Covid-related lockdown, Shanghai staff who worked at home returned to work. This will help the company renew its momentum in growing its e-commerce and advertising.
BILI stock may underperform as the lockdown dragged into the current quarter. But after that, the company will monetize its growing MAU and DAU. For example, paying customers reached a record high of 95 minutes spent on the platform.
Coupang (NYSE:CPNG) is not yet profitable. To get there, it needs to expand its market, grows revenue, and increase operating margins.
In the last quarter, Coupang posted revenue growth of 32% YOY. Chief Executive Officer Bon Kim is confident that the company will grow its e-commerce revenue faster than the market.
Coupang improved its operating efficiency, particularly around process and technology. In the next few years, EBITDA margins will expand beyond the 7% to 10% range.
Coupang will expand its Eats offering, a food delivery service. After improving on operating leverage, the next phase of Eats is expanding offerings. Still, it will not rely heavily on coupons and discounts to drive growth.
Futu Holdings (FUTU)
Futu Holdings operates a digitized brokerage and wealth management platform. The company looks attractive as it gains market share from weaker, smaller brokers.
In the last quarter, Futu said that it benefited from improving the quality and quantity of clients in Singapore. In the U.S., its client count grew. Since the average asset size fell, Futu will focus on raising client quality. The company will modify its client incentive program to attract clients with more assets. This should lead to more reliable quarterly profits.
Futu is educating its clients on how to trade on lower-risk assets. For example, it does not encourage clients to trade derivatives. Despite that, derivative trading accounted for 30% of Futu’s commission income.
JD.com is dealing with the Covid lockdown. It understood the impact of the more transmissible Omicron variant on its business. In the first outbreak two years ago, e-commerce and internet activity rose. This time, the lockdown and supply chain issues hurt JD’s warehouse and delivery stations.
At 618, an annual retail event, JD proactively participated in a grand promotion. While growth was slower than before, it was still up 10% leading into the event. Investors should expect the company to post stronger quarterly results.
For the rest of the year, JD’s margins should expand. The company adjusted its investment levels. As the macro environment improves, JD will manage its cash flow and profitability. It will invest in areas that improve its operations.
Sea (NYSE:SE) runs Shopee and SeaMoney. In the first quarter, the company highlighted efficiency gains due to scale. If it can keep that up, it will capture market share, strengthen its position and benefit from operating leverage.
Increasing user engagement is Sea’s priority. It is currently focused on increasing the longevity of Free Fire by adding more diversified content including more game modes. Users will also get user-generated content (UGC) tools.
In the first quarter, Sea posted an 80-cent-per-share loss. Revenue grew by 64.4% to $2.9 billion. SE stock is unattractive to cautious investors. Investors may consider a position from here before the company reaches profitability.
WiMi Hologram Cloud (WIMI)
WiMi Hologram Cloud (NASDAQ: WIMI) is an industry leader in AI vision and has been at the forefront of holographic AR technology research for many years. The company is also a leading provider of integrated holographic solutions. It also has leading technology reserves in the fields of holographic AR, 5G, artificial intelligence, arithmetic algorithms, digital twin, and virtual human.
In the past two years, the company has released a number of metaverse VR/AR/XR products, laying the foundation for the metaverse hardware market. In the meantime, WiMi has also accumulated various metaverse technology core capabilities, including AI computing, digital twin, simulation, AI vision, etc., further expanding its market influence through metaverse.
According to a research report, China’s metaverse market size is expected to maintain its growth trend from 2022-2027, reaching $42.53 billion in 2022 and further reaching $126.35 billion in 2027, with a CAGR of 32.98% from 2022-2027.
Additionally, Ketan Chaphalkar, an analyst at EvaluateResearch, noted, “Given the significant growth potential of the global holographic AR market and WiMi’s unique technology-intensive business model, the company is moving toward higher revenue growth and overall margin improvement with a huge advantage in the metaverse.”