US Rate Cut Expectations Could Make Chinese Stocks the Next Opportunity Worth Watching

The combination of a recovering Chinese economy and potential US rate cuts is creating an interesting window for investors looking at undervalued Chinese companies. With housing markets showing signs of recovery and recent US payroll data signaling possible Federal Reserve rate reductions in the coming months, the conditions are aligning for Chinese equities to gain traction.

Supply Chain Play: China Automotive Systems (CAAS)

China Automotive Systems (NASDAQ: CAAS) has become an interesting case study for how companies can maintain efficiency even during slowdown periods. As a supplier of automotive steering components to major manufacturers including BYD, Ford, and Stellantis, the company’s performance reflects the broader health of China’s automotive sector.

In the first quarter, while revenues remained relatively flat with a 2% decline, the company delivered a more impressive metric: EPS increased by 17.4%. This suggests that despite current volume challenges, the company’s operational management is solid. The real opportunity emerges when considering what happens next. If China’s economic recovery continues as expected, vehicle sales should accelerate, meaning higher component demand for suppliers like CAAS. Getting positioned now could be timing the entry before volume begins climbing.

Logistics Infrastructure Benefit: Full Truck Alliance (YMM)

Full Truck Alliance (NYSE: YMM) operates China’s digitized freight matching platform, essentially serving as the infrastructure backbone for supply chain logistics. The company offers everything from freight listing and brokerage to insurance, credit solutions, and toll collection services.

What stands out is that Full Truck Alliance is inherently positioned to benefit from any economic recovery. As a supply chain services firm, increased business activity directly translates to higher utilization of its platform. The Q1 results back this up: revenues surged 33% to $314.2 million while net income jumped 42.5% to $81.2 million. Trading below $9 per share, it also offers something rare in this segment—a dividend yield, providing both growth and income potential in a single position.

Content Streaming Growth Potential: HUYA Inc. (HUYA)

HUYA Inc. (NYSE: HUYA) operates one of China’s major streaming platforms, and despite near-term headwinds showing up in revenue softness, the stock has performed well throughout 2024. Analyst price targets suggest 25% upside to potential doubling scenarios.

The company’s most recent earnings showed mixed signals: operational metrics improved and losses narrowed, but these gains came alongside lower overall volume. However, the underlying structural growth potential of streaming platforms in China remains compelling for growth-oriented investors. Additionally, HUYA initiated a $100 million share repurchase program in late 2023, with roughly $50 million deployed by Q1’s end—a signal of management confidence and capital allocation discipline.

The Macro Setup

The intersection of US rate cut expectations and Chinese economic recovery creates the backdrop for these opportunities. When US rates decline, capital often seeks higher-growth opportunities elsewhere, and a recovering Chinese economy becomes an attractive target. These three companies—spanning supply chain logistics, automotive components, and digital media—offer different exposure angles to benefit from this scenario.