Chinese Stocks Got Murdered! Generational Buying Opportunity? Or Falling Knife? (China Stocks 2022)
Chinese stocks have been absolutely crushed recently. The Hang Seng China Enterprises Index is down 43% from its 2021 high. Chinese stocks listed in Hong Kong actually had their worst day since the global financial crisis in 2008. It seems like generally stock declines are much more rapid nowadays as only around a year ago Chinese stocks were enjoying an unprecedented boom. The Chinese KraneShares CSI China index for instance, which covers Chinese Internet-related businesses, reached an all-time high of $102 just one year ago. Fast-forward to today and the KWEB index got absolutely crushed.
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Obviously, such a decline in a broad stock market index is almost unprecedented and was basically only seen in the Nasdaq’s 78% peak-to-trough decline during the dot-com bust which took 31 months. The KWEB Chinese Internet ETF's 80% decline on the other hand occurred in just 13 months. So the question investors need to ask themselves here is whether this massive sell-off offers opportunities or whether investors need to stay clear of Chinese stocks due to the risks associated with Chinese investments.
I’ve covered some Chinese stocks on this channel in the past. In particular, I made a couple of videos on Alibaba’s stock. And just like broad Chinese stock indices are down big time, individual stocks like Alibaba, JD.com, Pinduoduo, and Tencent also suffered unprecedented losses. At one point last week, Alibaba was trading for $74, below Alibaba’s IPO price back in 2014.
Now I think these steep price declines should catch every investors’ attention. How and why did Chinese stocks go from being investors’ favorite stocks to no one in the investing world wanting to touch anything related to China? Just the other day, the investment bank JPMorgan downgraded Alibaba and 28 other Chinese stocks following the incredibly brutal price decline and they called Chinese Internet stocks quote "Uninvestable" for the foreseeable future. They wrote: “A large number of global investors are in the process of reducing exposure to the China internet sector, leading to significant fund outflows from the sector.” And similarly, the U.S. Securities and Exchange Commission said last week that U.S.-listed securities for five Chinese companies are at risk of delisting.
I think there are three concerns: First off, there’s China’s continued zero-Covid policy and due to the number of Covid cases going up by quite a bit recently in some Chinese regions, the Chinese health authorities have ordered new pandemic-related shutdowns in Shenzhen. Then the geopolitical tensions and the tragic war in Ukraine seem to be another main concern.
Chapters:
0:00 Chinese Stocks in Turmoil
1:52 Unprecedented Losses
2:38 Why Chinese Stocks Collapsed
3:40 First two reasons
5:00 Multibillion dollar stocks worthless
5:45 What if …
7:20 Untangling this complexity
8:21 Fundamentals Part 2
8:45 Positive News!
9:14 Positive News! Part 2
10:57 What to make of this?
12:02 Guy Spier on risk
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The content provided on this channel should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. The stocks and funds discussed on this channel are examples only and may not be appropriate for your individual circumstances.
Before making any financial or investment decisions, I recommend you consult a financial planner or advisor to take into account your personal investment objectives, financial situation, and individual needs.
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I hope you enjoyed the content!
