US-listed Chinese shares poised for more gains in 2015

A Chinese employee walks at the office of Chinese online fashion retailer Vipshop in Shanghai, Aug 13, 2013. [Photo/IC]

The best-performing Chinese Internet stocks traded in the United States are set to extend their rallies in 2015, unfettered by forecasts for slower growth in the world's second-largest economy.

Vipshop Holdings Ltd, an online retailer whose shares have surged 30-fold since its US debut in March 2012, and car-listing website Bitauto Holdings Ltd may both advance an additional 32 percent in the next 12 months, according to average analyst estimates compiled by Bloomberg. The companies, which doubled this year, have the best performances on the Bloomberg China-US Equity Index since 2012.

While a slowdown in China's economy may cut sales growth, Web-based companies such as Vipshop and Bitauto will retain their competitive advantages by maintaining good relations with vendors, capturing popular niches and expanding services, according to Henry Guo at JG Capital. Of 25 analysts covering Vipshop, 20 rate it a buy and just one recommends selling. None of the nine analysts covering Bitauto has a sell.

"Vipshop's competitors, including Alibaba, have platforms where suppliers have to do everything themselves, from making photos of the products to posting them on the website to getting feedback, while Vipshop has almost 1,000 people who do everything for suppliers," Guo said by phone on Dec 19.

The 12-month consensus price estimates for Vipshop and Bitauto compare with a 14 percent increase projection for Alibaba Group Holding Ltd, China's biggest e-commerce company, by 33 analysts.

Brendan Ahern, managing director at Krane Fund Advisors LLC in New York, said in an e-mail that: "The most favorable Chinese companies to own in 2015 are those companies in the sectors of the economy favored by China's government and the growing middle class."

China's Internet users still represent less than half of the country's population, whose middle class was estimated at 200 million people by Alibaba Chief Executive Officer Jack Ma.

Chinese online companies are seeking to maintain their pace of growth as the nation faces its slowest expansion since 1990 amid slumping home sales and a credit crunch. Gross domestic product will expand just 7 percent in 2015, down from this year's estimated 7.4 percent, according to a Bloomberg survey of 51 analysts.

While Vipshop's 2014 sales will probably double from the prior year, the rate may slow to 66 percent in 2015, according to the average of 22 analyst estimates collated by Bloomberg.

Revenue growth at Bitauto may decline to 39 percent in 2015 from an estimated 56 percent this year.

Li Junheng, founder of JL Warren Capital LLC in New York, said last week that: "The Internet sector will eventually be impacted by the weakness in the macroeconomy. E-commerce companies will be impacted after people first cut high-end spending such as cars and luxury branded goods."

Vipshop's 13 percent slump in the past month is reflective of those concerns, she said.