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Stay Away From Chinese Stock For Peace Of Mind

Chinese stocks, especially tech stocks now has unprecedented policy / regulation risk. BABA’s anti-trust investigation was met with little resistance from BABA. Jack Ma and BABA pretty much admitted guilt and gladly paid whatever fine to get over it. It’s as if US Justice Department sues FB for anti-trust and wants to split Instagram from FB and Zuck just says “Okay! And here is 1 billion dollar for your trouble Mr Judge.” Instead, any similar anti-trust case in US will be met with fierce resistance from big corporations and litigation will last for years or maybe decades.

DIDI, with the rumor that Chinese government is going to give them unprecedented punishment, dropped 20% today.

Overnight while all tards are sleeping tightly in the freedom country, Bloomberg reported that Chinese government is planning to turn education and online tutoring sector into **nonprofit.** It dropped the entire Chinese education sector by **50% – 70%**. RIP for EDU and TAL bagholders…

Well, the scary thing is the public opinion in China always aligns with what the government wants to do. If you have friends in China, look up their comments on WeChat or WeiBo, they are cheering for turning education sector into non-profit.

The honeymoon with Chinese tech stocks are way over and the price Chinese stocks, even now for some, have priced in friendly, laissez faire regulation and CONTROL from the Chinese government.

And we can look at the data “In total, more than $650 billion of market value has been erased from the 98 stocks that make up the Nasdaq Golden Dragon China Index since the gauge hit a record high in February.” – Bloomberg.

Without the regulatory pressure, I believe Chinese stocks would have been at ATH just like SPY and other indexes.

It might be the time to be greedy while the market is fearful. Chinese market is huge and with tons of growth potential for anything and everything. But maybe in the short-term until this muddy policy / attitude shift is over, it’s better to stay away from the Chinese stock to not have that gut wrenching feeling when one of your holding drops 50% overnight without any fundamental change to its business.

Edit: Added some data from Bloomberg

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37 Comments

  1. Honestly, looking at the US and China’s stock market you really get a sense of the institutional differences between the two countries. In the US, no matter republican/democrats, the entire government is essentially captured by corporations. They will prop up the stock market no matter what.

    In China, the gov does not really give a fuck. In fact corporations that gets too strong or goes against gov macro policy will just simply get fucked. The corporations really have to suck off the government.

  2. I think that is a fair opinion, it adds a whole extra element to the situation when their govt can take whatever action it wants, even disappearing CEOs straight into prison with no public statement or hearing. Also, there is the question of are companies listed on foreign exchanges being regulated differently than other Chinese companies?

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Ok hear me out please .