Analysts say previous declines in Chinese stocks may be partly due to some institutions selling their worst-performing stocks at the end of the year, meaning the selling pressure may ease in the new year.
Stocks of US-listed Chinese companies saw a rare comeback Thursday after a continuous sell-off over the past month.
The Invesco Golden Dragon China ETF (PGJ), which focuses on US-listed Chinese companies, rose 9.5 percent on Thursday, its biggest one-day gain since 2008.
Prior to that, the ETF was down about 50 percent cumulatively this year.
NIO's gain Thursday was the highest in the past year, and it also had a single-day trading volume of 137 million, the third highest in the US market, according to data from Moomoo, the stock software of Futura Holdings.
"It's finally time to buy Chinese stocks," Vital Knowledge analyst Adam Crisafulli wrote in a research note, according to a Bloomberg report today.
The Nasdaq Golden Dragon China Index, which rallied 9.4 percent, is back at levels that have acted as solid support going back over the last several years, he said.
"I think China is cheap. If you look at the performance of China this year, on a relative basis, it has actually underperformed by about 40 percent against both the European indices as well as the American indices," said Kelvin Tay, regional chief investment officer at UBS Global Wealth Management, according to CNBC.
"From a valuations perspective, from a positioning perspective, China certainly looks very, very attractive," Tay said.
Matt Maley, chief market strategist at Miller Tabak + Co, said the drop in Chinese companies' stocks earlier this week may be partly due to some institutions selling off their worst-performing stocks at the end of the year, meaning the selloff in Chinese stocks could ease in the new year.
However, he remains cautious about potential regulatory uncertainty ahead, according to Bloomberg.
"Even though the New Year should take some selling pressure off these names, there is too much uncertainty for US investors to move back into these stocks in a meaningful way," he said.
Tay also warned that the Chinese market is unlikely to recover in the next three months due to a "distinct lack of catalysts" presently. He cited the need for China's property space to settle before the market can turn around, according to CNBC.