Chinese Internet Growth Is Still Ridiculous: Here's How To Buy The Dip

• Despite global concerns over a weakening Chinese economy, Chinese Internet stocks continue their rapid growth
• The 25 Internet companies that attended CLSA’s Investors’ Forum reported minimal impact from the downturn
• CLSA’s top picks in the space include Alibaba, JD.com, Ctrip.com and Baidu

Chinese economic weakness has been the primary concern for global investors in recent months. However, a new report by CLSA analyst Elinor Leung discusses one segment in China that is still seeing rapid topline growth: Internet companies.

Twenty-five Chinese Internet companies attended CLSA’s Investors’ Forum, and Leung summarizes the key takeaways from the forum and names CLSA’s top stock picks in the space.

Impact of a slowing economy
Despite weak economic numbers and plummeting share prices, Leung notes that many Chinese Internet companies have seen very little change in their revenue growth trajectories. In addition, the market weakness in China could actually end up helping the larger Chinese Internet companies in one unexpected way.

“Listed companies could benefit from a weak A-share market, as small companies cannot access financing and the weak market accelerates consolidation,” Leung explains.

Companies attending the Investors’ Forum cited high savings rate, increasing consumer spending power and gains in off-line market share as top reasons many of the companies have avoided a major impact from the downturn in China.

Top names
According to Leung, Alibaba Group Holding Ltd BABA, which has seen a 41 percent decline in share price so far this year, reported only a 2.0 percent decline in gross merchandise volume resulting from the Chinese economic downturn.

JD.com Inc JD also reported that it expects to maintain strong growth and share gains from offline competitors.

Stock picks
Surprisingly, Leung reports that Chinese Internet companies expect to continue to grow their top lines at a rate of 30-50 percent annually.

CLSA’s top stock picks in the space include Alibaba and JD.com. CLSA also upgrades Ctrip.com International Ltd CTRP and Baidu Inc BIDU to Buy.

Disclosure: the author holds no position in the stocks mentioned.