Major Chinese companies’ latest quarterly reports reinforce how the local market is one for stock pickers. “There has been outperformance, but it has been unique to certain companies,” Lorraine Tan, director of Asia equity research at Morningstar, said in a phone interview with CNBC Pro. “The trend is, across the board, more so weakness reflecting macro trends, and guidance is cautious.” “The individual companies that have outperformed have done so because they have a much more resilient mix of products, or business market positions,” she said. Of note, Alibaba and Tencent each reported capital expenditures that roughly doubled from a year ago — to $1.66 billion and 8.73 billion yuan ($1.22 billion), respectively — in the quarter ended June. That observation by Morgan Stanley China equity strategist Laura Wang and her team indicates a potential turnaround in domestic demand for Chinese data center company GDS Holdings . The strategists added the U.S.-listed stock to their focus list for China and Hong Kong on Aug. 21. Their current optimism stems mainly from GDS’ “significant first mover advantage” in overseas expansion, especially given its land agreement in Malaysia. Another Chinese stock with growing exposure to overseas growth is Temu parent PDD Holdings , which is scheduled to report earnings before the U.S. market open on Monday. As of Friday, PDD held the second-largest weighting in CoreValues Alpha Greater China Growth ETF (CGRO). Tencent was first. The ETF, launched in October 2023, is hardly a year old. Ben Harburg, founder of CoreValues Alpha and a portfolio manager of the fund, participated in early-stage investments in Chinese companies Meituan and Nio, before they went public. “We think we can trade China’s public [markets] better than other ETFs,” he said, noting his firm has offices in both the U.S. and China. That gives the ETF managers timely information to move in and out of Chinese stocks. Harburg told me the team is changing up the portfolio “every week or two” and that “China is too complicated to trade on a passive basis.” CGRO holds just over 30 Chinese companies that meet criteria such as “not compromising American tech, economic interests or values” or appearing on U.S. sanctions lists, according to the ETF’s website. The CGRO ETF was down 4.3% year to date as of Friday’s close, versus 2.3% in losses during that time for KraneShares CSI China Internet ETF (KWEB). “We haven’t seen outflows. We’ve been steady but we’ve got to show outperformance as a market before people can put money,” Harburg said. “I think it’s going to be name by name. Not rising tide.” Chinese stocks in Hong Kong and the mainland have generally struggled to recover significantly since the pandemic due to a swath of uncertainty about growth and policy. Harburg said he doesn’t expect Beijing to stimulate growth, and that the more likely catalyst for beaten-down Chinese stocks will come from a U.S. stock market drop. “I do think that the U.S. market is irrationally valued so you’ve got at some point to see some correction,” he said. “Japan and India was absorbing some of the ancillary capital that should have gone into China.” Japanese and Indian stocks are up 14% and 12%, respectively, for the year. — CNBC’s Michael Bloom contributed to this report.