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The Chinese Tech Stocks Taking Over The World

Beijing

There are some sectors of the stock market that investors consign to the scrapheap because they believe money goes there to die.

Not too long ago, investing in Chinese stocks was considered a big gamble and certainly not for the faint-hearted.

Investors mainly feared that an overheated Chinese economy was about to implode and drag down these stocks.

Meanwhile, Chinese companies such as Alibaba Group (NYSE:BABA) and JD.com Inc. (NASDAQ:JD) were perceived as havens of counterfeit goods who could never be able to compete with the likes of Amazon Inc. (NASDAQ:AMZN).

Volatility in the space was sky-high and few wanted to touch it.

But years of neglect finally led to an unintended consequence--U.S. stocks became very pricey with valuations that were well above historical averages, while their Chinese peers looked much cheaper with strong growth to boot.

 Suddenly value investors and bargain hunters turned to the Middle Kingdom.

Chinese Brands Break Into Top Ranks

It therefore comes as little surprise that Chinese companies are now joining the ranks of the world's most valuable brands--a space that has mostly been dominated by America's top brass.

Giant e-commerce player, Alibaba, and leading Asian investment holding conglomerate, Tencent Holdings (OTCPK:TCEHY), have joined the likes of Alphabet Inc. (NASDAQ:GOOG) and Apple Inc. (NASDAQ: AAPL) in the top 10 of Brandz' Top 100 Most Valuable Global Brands for 2018. Related: A New Political Crisis Threatens The Eurozone

The top 10 companies in order of brand value are as follows:

(Click to enlarge)

Source: Brandz.com

This marks the first time that two Chinese companies have made it in the top 10 of that vaulted list, and it’s no mean feat given the numerous challenges facing Chinese brands.

Doreen Wang, the head of BrandZ, says that younger consumers are increasingly falling in love with Chinese brands and helping to change how these brands are perceived. As a result, more Chinese companies are moving from being mere household names in their native country to global icons and powerhouses.

Last year, Tencent was ranked 8th but managed to climb to 5th after a 65-percent improvement in its brand value that brought its new brand value to $179 billion--a good 36 percent of the $500-billion market cap company.

Tencent made history last year by becoming the first Asian company to cross the $500-billion valuation mark ahead of even Alibaba. The company comprises a hodgepodge of internet-based platforms and super-apps that range from information and gaming to social media and artificial intelligence. Its largest social media network, Weixin(WeChat), boasts nearly a billion monthly active users.

Tencent also owns a slew of personalization services, online payment systems and a popular video streaming service quite similar to YouTube.

TCEHY stock is up 43 percent over the past 12 months, outperforming popular Chinese ETFs such as the Kraneshares CSI China Internet ETF(KWEB).

TCEHY vs. KWEB 12-Month Change

(Click to enlarge)

Source: CNN Money

Meanwhile, Alibaba, the Amazon of China, is the latest Chinese addition to the world's most valuable brands. The company has been rapidly gaining ground in emerging markets including Brazil, Chile and Latin America as well as Spain, Israel and South Korea where its AliExpress ecommerce platform has been growing in popularity. This has helped Alibaba post impressive growth numbers that have even been eclipsing those by its American peer.

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Alibaba though is keen to develop its own identity separate from Amazon's, and insists it has no plans to copy the latter's highly successful Prime subscriptions but instead plans to roll out its own model. The company says it will also focus on franchising brick-and-mortar retail locations.

BABA vs. AMZN 12-Month Change

(Click to enlarge)

Source: CNN Money

This has helped BABA stock to match the growth by its more popular cousin, AMZN.

Here's a full list of Chinese ADRs.

By Alex Kimani for Safehaven.com

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