3 Top Chinese Stocks to Watch in July

China has been playing a major role in the global economy for years, but investing in the giant nation can sometimes be a little worrying. With the trade war brewing between the United States and China, investing in the country requires even more vigilance than usual today. According to three of our Motley Fool contributors, right now investors should be keeping close watch on…

Chinese drug company BeiGene (NASDAQ:BGNE) and technology upstart Baozun (NASDAQ:BZUN) because of the potential for negative trade war impacts. Meanwhile, China National Offshore Oil Company (NYSE:CEO) is worth tracking because of the benefit it might get from a worsening of the trade spat.

Can this Chinese biotech recover?

George Budwell (BeiGene): The Chinese biotech BeiGene is definitely worth keeping close tabs on this month. Although the biotech’s shares have gained an astounding 351% since their IPO on the Nasdaq stock exchange a little over three years ago, BeiGene’s stock has actually been locked in a worrisome downward trend for the better part of the last 11 months. In fact, BeiGene’s shares have now lost a staggering 41% from their three-year highs, thanks to concerns about its tie-up with biotech heavyweight Celgene.

Long story short, Celgene was forced to relinquish the global commercial rights to BeiGene’s anti-PD-1 antibody tislelizumab following Celgene’s acquisition by Bristol-Myers Squibb earlier this year. Tislelizumab, after all, was slated to be a direct competitor to Bristol’s flagship cancer medication, Opdivo. The big deal is that Celgene’s involvement almost guaranteed the drug’s commercial success, given the biotech’s worldwide reach and deep experience with regulatory agencies across the globe. That doesn’t mean that BeiGene won’t be able to make tislelizumab a smashing commercial success, but the company will have to take on several of the world’s largest biopharmas to accomplish this rather daunting feat.

The bright side is that BeiGene did retain the commercial rights to Celgene’s Abraxane, Revlimid, and Vidaza in China, and the biotech also has a rich pipeline of high-value anti-cancer medications in mid- to late-stage development. So the company does have a solid base from which to create value for shareholders over the long term. Additionally, BeiGene might end up attracting another big-time partner for tislelizumab — perhaps one capable of putting the drug on equal footing with Opdivo or Merck‘s Keytruda from a marketing standpoint. That’s not a surefire development in light of the fact that there are numerous PD-1 inhibitors in the clinic at the moment, but it’s not out of the realm of possibility, either.

In tariff crosshairs?

Brian Stoffel (Baozun): A lot of people have come to call Baozun the “Shopify of China.” For those who might be unfamiliar, Shopify allows just about anyone to set up an e-commerce presence.

That analogy works on some levels, but it isn’t perfect. In reality, Baozun is more of a gateway for brands outside of China to get a foothold in the Middle Kingdom. It signs on partners that want help in reaching the growing middle class in China.

Any Chinese-listed company would be affected by the slings and arrows associated with the U.S.’s prolonged discussions on tariffs with China. Baozun is no exception. In fact, I believe the company is acutely affected by such decisions.

There’s no telling exactly how tariffs might affect different product categories — in ways that are favorable or not — as a result of trade talks. But because Baozun is helping bring in products from outside of China, it may be affected more than others.

Of course, just about any e-commerce company in China will be affected by trade talks. And there’s no telling what, if anything, might be revealed during the month of July. But with a market cap of just $3.4 billion — versus behemoths like Alibaba and JD.com — I think the stock could swing more on any news. There’s no telling which way that swing could be, which is why I think it’s worth watching in the month ahead… and beyond…

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