Should you buy Chinese tech stocks now that China is reopening?

Chinese tech stocks are a great pick at current valuations but only for the long-term investors, says Anand Batepati of GFM Focus Investing.

Which Chinese stocks does he recommend?

Two names that particularly pop out to him are Alibaba Group Holding Ltd (NYSE: BABA) and Tencent Holdings (OTCMKTS: TCEHY).

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Batepati is constructive only partly because China is pulling out of the COVID restrictions. What’s more important to him is the strength of their underlying businesses.

These are excellent businesses. There are very few companies that generate $15 to $20 billion in free cash flow. Alibaba and Tencent are two of those names and you’re getting them at less than liquidation value.

Earlier this week, China said it will remove the requirement of quarantine for inbound travellers from January 8^th. Both of Batepati’s stock picks are currently down more than 30% year-to-date.

Risks are already priced in

Batepati does agree that the likes of Alibaba stock and Tencent are not entirely free of headwinds, but the related sell-off, he noted, was quite overdone. This morning on CNBC’s “TechCheck”, the GFM co-founder added:

You’re getting a couple of their underlying businesses for free. Softening of the regulatory clampdown that we’ve seen some indications of, and China reopening are a few of the catalysts why we’re bullish.

Again, his recommendation is only for the long-term investors. These names are not suitable for “trading”, he confirmed.

It is also noteworthy that both Alibaba Group Holding Ltd and Tencent Holdings topped Street estimates for earnings in their latest reported quarter.