Three profitable Hong Kong stocks that are cheap

Dale Nicholls, the portfolio manager of the Fidelity China Special Situations investment trust, has selected three Hong Kong stocks to take into consideration

An actively managed investment vehicle, Fidelity China Special Situations offers wide access to China's growth prospects, from well-known technology leaders to start-up companies that haven't yet gone public. Although China's diversified economy offers some resilience against these external headwinds, Chinese and Hong Kong stocks have seen increased volatility thus far this year due to geopolitical tensions, rising energy prices, and worries about inflation.

AI isn't the only factor either. While internet platforms have lagged behind the market, semiconductors, power equipment, and other AI infrastructure-related businesses have seen stronger earnings momentum. Due to persistent weakness in the real estate market, consumer confidence is still low domestically. However, there are indications that the economy is stabilizing thanks to targeted but still encouraging state policy. In light of this, many businesses are trading at steep discounts to their international counterparts, and there are appealing opportunities in a variety of industries, including domestic consumption, advanced manufacturing, and real estate, where valuations do not accurately reflect strong long-term fundamentals.

For your portfolio, choose three Hong Kong stocks.

Amperex Technology (Hong Kong: 3750) is a global leader in the electrification value chain and the largest battery manufacturer in the world thanks to its leadership, large manufacturing capacity, and ongoing investment in innovation.

Electric vehicle batteries continue to be a significant growth driver, but the company is diversifying more and more. The increasing production of renewable energy, the need for electricity security, and the quickly growing demand for power from AI data centers are all contributing factors to the emergence of energy storage systems (ESS) as another significant growth driver. Although electrification is still in its early stages in many markets, commercial vehicles and the growing EV penetration outside of China present additional opportunities. This company is well-positioned to take advantage of these various sources of long-term demand across transportation and power systems thanks to its size and technological leadership.

One of the top sportswear companies in China, Anta Sports (Hong Kong: 2020) has a multi-brand portfolio that includes mass-market sportswear, high-end sports fashion, and specialty outdoor categories. In China's expanding sportswear market, its solid brand management, methodical execution, and tested direct-to-consumer strategy have all contributed to steady increases in market share. Crucially, Anta has a proven track record of acquiring, repositioning, and scaling brands, opening up new growth opportunities outside of its primary franchise. The portfolio is further expanded by more recent additions like Puma and Jack Wolfskin. Anta is in a strong position to keep expanding its market share in China's changing sportswear sector.

One of the top real estate firms in China, China Resources Land (Hong Kong: 1109) has a superior investment portfolio that includes retail establishments in addition to its residential business. As weaker developers have left the market, the company has continued to increase its market share despite the protracted downturn, and its investment properties have produced consistent growth and reliable recurring income. The market is undervaluing the quality and worth of its portfolio of investment properties.