Some Chinese Stocks Are a Real Bargain Now. Alibaba Is One of Them.

Value managers routinely venture into markets that others are fleeing, and right now that makes China a natural destination.

With the U.S. and China entering an even more tense relationship, many money managers have reined in their allocations to China and rolled out emerging markets ex-China funds for skittish clients. BCA Research analysts highlighted glimpses of stabilization in the economy, with China’s credit growth improving in August and deflationary pressures seen earlier in the summer easing, with consumer prices up 0.1% versus the earlier year, better than the 0.3% decline in July.

For Henry Mallari-D’Auria, Ariel’s chief investment officer of global and emerging markets equities, the focus is on consumer-oriented companies he thinks will see faster growth in coming years, in part from Beijing’s efforts to revive confidence among households. Former Alibaba Chief Executive Daniel Zhang’s decision to step down two months after taking on the task of focusing on the company’s AliCloud unit creates a short-term cloud over the stock, which fell more than 4% on the news. The company said Zhang was leaving to run a new technology fund that AliGroup is expected to invest an initial $1 billion.

If consumers feel better about their prospects as Beijing delivers more stimulus, Mallari-D’Auria says automakers like Great Wall Motor could stand to benefit. Better auto sales would help but the company has a new sport-utility vehicle that allows them to take share at a higher profit per unit than in the past, and that should boost margins, he says.

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