“Consumers Don’t Have the Money to Spend”: 10 Chinese Stocks at Risk as Orders Drop

In this article, we discuss the 10 Chinese stocks at risk as orders drop in the US. If you want to read about some more Chinese stocks at risk as orders drop in the US, go directly to 5 Chinese Stocks at Risk as Orders Drop.

A possible real estate crash in China is threatening to slow down the economy of the Asian superpower, with effects set to reverberate around the world. Reports of a brewing crisis within the manufacturing sector lend further credence to claims that a global economic collapse might be on the way. According to news platform Bloomberg, factories in China are witnessing a dramatic decrease in orders from overseas and projecting that the best-case scenario for them is flat demand compared to last year. 

The slowdown is a result of soaring inflation, not just in the United States, which is a key importer of products from the country, but also across the world. Consumers are cutting back on their spending as the prices of goods rapidly rise and Bloomberg claims that this sentiment might weigh on manufacturing stocks longer than expected. Some of the prominent Chinese stocks likely to be affected by the slowing demand include Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), and NIO Inc. (NYSE:NIO). 

Wendy Ma, the marketing manager at a textile maker in China, recently told Bloomberg that the demand slowdown has been rather sudden and noted that “consumers don’t have the money to spend with soaring inflation”. The marketing manager claims that orders for items, including buttons, zippers, and sewing thread, dropped around 30% in July and August compared to a year earlier. She attributed the decrease to a decline in demand for these products from major markets in the US and Europe. 

The slowdown has increased investor concerns around Chinese stocks that are already under pressure because of regulatory crackdowns in China and stricter compliance guidelines in the US, that are asking for independent audits of dual-listed Chinese firms. Larry Hu, the head of China economics at Macquarie Group, has soothed investor questions about a collapse of the manufacturing sector in China, noting that the “decline in demand for China-made goods will be gradual” over the coming months. 

The demand slowdown is evident from recent retail, investment, and industrial production numbers for July that have all missed their targets. The Chinese government recently cut the benchmark interest rate in an unexpected move to ramp up support for the industries, but the signs of a deeper crisis within the economy continue to persist. Companies that source products from China to sell overseas claim that orders have dropped by 30% to 50% from the US and Europe in the past few months. 

The slowing demand for goods is a global phenomenon, as it indicates a shift towards services amid rising travel demand due to easing of COVID restrictions in many parts of the world. This has also led to bloated inventories in the US retail sector. Bloomberg estimates that inventories at companies in the S&P consumer-discretionary and consumer-staples indexes rose by $93.5 billion in the past twelve months, representing an increase of  25% year-on-year. This problem has arisen due to shipping delays and front-loading orders. 

Our Methodology

The companies that are based in China but have links with the US economy were selected for the list. The business fundamentals of these firms and the latest updates related to them are also discussed to provide some additional context. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.

“Consumers Don’t Have the Money to Spend”: Chinese Stocks at Risk as Orders Drop

10. Huadi International Group Co., Ltd. (NASDAQ:HUDI)

Number of Hedge Fund Holders: N/A    

Huadi International Group Co., Ltd. (NASDAQ:HUDI) makes and sells stainless steel seamless pipes, tubes, bars, and plates. It is based in Wenzhou. The firm exports to over 20 countries around the world, including the United States. These products are used in oil and gas transmission, chemistry engineering, food processing, medical devices, aeronautics and astronautics, boiler, irrigation works construction, electricity, automobile, naval architecture, paper mill, and mechanical industries. The firm was founded in 1992. Declining orders from the US are impacting the business of the firm. 

In late 2021, Huadi International Group Co., Ltd. (NASDAQ:HUDI) announced that it had won a contract worth $3.2 million from a client in the United States for the delivery of square-cut and beveled seamless or electric-fusion welded austenitic stainless steel pipes. 

In early February, Huadi International Group Co., Ltd. (NASDAQ:HUDI) posted earnings for the 2021 fiscal year, reporting earnings per share of $0.21 and a revenue of $70 million, up more than 18% compared to the revenue in 2020. 

Just like Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), and NIO Inc. (NYSE:NIO), Huadi International Group Co., Ltd. (NASDAQ:HUDI) is one of the Chinese stocks at risk as the US faces a recession. 

9. CN Energy Group. Inc. (NASDAQ:CNEY)

Number of Hedge Fund Holders: N/A  

CN Energy Group. Inc. (NASDAQ:CNEY) manufactures and supplies wood-based activated carbon. This is used by a variety of industries in the US, including pharmaceutical manufacturing, industrial manufacturing, water purification, environmental protection, and food and beverage production. The firm also produces biomass electricity for State Grid Heilongjiang. It is based in the Liandu District and was founded in 2018. The company posted close to $20 million in revenue in 2021, up from $12 million in 2020. A slowdown in the US economy is having a trickle down effect on the company as well. 

In early 2022, CN Energy Group. Inc. (NASDAQ:CNEY) announced that it had entered into a strategic cooperation agreement with Xujin Environmental Protection Carbon Industry. As part of the deal, the two firms agreed to cooperate in sharing resources for mutual benefits. Kangbin Zheng, the CEO of CN Energy Group. Inc. (NASDAQ:CNEY), said on the occasion that the partnership would help the company expand on a plan to increase market share and improve value for shareholders. 

8. Planet Green Holdings Corp. (NYSE:PLAG)

Number of Hedge Fund Holders: 1

Planet Green Holdings Corp. (NYSE:PLAG) makes and sells brick, black, and green tea products. It is based in Yantai. It also sells chemical products like formaldehyde, urea formaldehyde adhesive, methyl, ethanol fuel, fuel additives, and clean fuel. In mid-July, the firm announced it had agreed to a share exchange agreement with LNG production facilities company Xianning Xiangtian Energy Holdings Group. The company sells skid-mounted refuelling and LNG cryogenic equipment in the US. Recession fears in the US and shifting consumer spending patterns are hurting the business of the firm in the country. 

Planet Green Holdings Corp. (NYSE:PLAG) stock has risen in the past few weeks after a securities filing disclosed that Bin Zhou, the CEO of the firm, had bought nearly 1.42 million shares of the firm, taking his ownership in Planet Green Holdings Corp. (NYSE:PLAG) to 9,942,000 shares. 

At the end of the second quarter of 2022, 1 hedge fund in the database of Insider Monkey held a stake worth $13,000 in Planet Green Holdings Corp. (NYSE:PLAG), compared to 2 in the previous quarter worth $59,000.

7. Greenland Technologies Holding Corporation (NASDAQ:GTEC)

Number of Hedge Fund Holders: 1     

Greenland Technologies Holding Corporation (NASDAQ:GTEC) makes and sells drivetrain systems for material handling machineries, electric vehicles, and electric industrial vehicles. It is based in Hangzhou. The firm markets transmission products and robotic cargo carriers at competitive prices which are used by factories, workshops, warehouses, fulfillment centers, shipyards, and seaports in the US. Amid slowing demand, the sales of these products are at risk of being affected. The company posted a revenue of over $20 million in the second quarter of 2022. As consumer spending slows down, orders from the US are drying up, forcing firms like Greenland to look elsewhere for exports. 

On May 18, Litchfield Hills analyst Theodore O’Neill initiated coverage of Greenland Technologies Holding Corporation (NASDAQ:GTEC) stock with a Buy rating and a price target of $15, backing the firm to benefit from growth in the US construction equipment market. 

At the end of the second quarter of 2022, 1 hedge fund in the database of Insider Monkey held a stake worth $110,000 in Greenland Technologies Holding Corporation (NASDAQ:GTEC). 

6. EHang Holdings Limited (NASDAQ:EH)

Number of Hedge Fund Holders: 2  

EHang Holdings Limited (NASDAQ:EH) owns and runs an autonomous aerial vehicle technology platform. It is based in Guangzhou. It also offers passenger transportation, logistics, smart city management, and aerial media solutions. The firm is the leading eVTOL company firm in the world with over 100 sales. The firm expects to complete type certification for autonomous aircrafts in the next quarter and to begin commercial operations by the end of this year. The market for eVTOL, an aircraft that uses electric power to hover, take off, and land vertically, is huge in the US. However, a slowdown in the US economy over the past few months has affected the overall outlook of the company. 

EHang Holdings Limited (NASDAQ:EH) posted earnings for the second quarter of 2022 on August 18, reporting losses per share of $0.14 and a revenue of $2.2 million, up more than 15% compared to the revenue over the same period last year. 

Among the hedge funds being tracked by Insider Monkey, London-based investment firm Marshall Wace LLP is a leading shareholder in EHang Holdings Limited (NASDAQ:EH), with 882,416 shares worth more than $8 million. 

Alongside Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), and NIO Inc. (NYSE:NIO), EHang Holdings Limited (NASDAQ:EH) is one of the Chinese stocks at risk amid a slowing global economy. 

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Disclosure. None. “Consumers Don’t Have the Money to Spend”: 10 Chinese Stocks at Risk as Orders Drop is originally published on Insider Monkey.