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ALIBABA STOCK, TENCENT, BAIDU, JD.COM - Chinese Stocks at Bottom Already? Recover Soon? - YouTube
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hi everyone this victor here welcome to
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the intelligent investor channel in my
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previous video i talked about the four
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major risks of investing in chinese
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stocks we should know about i talked
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about the current cybersecurity reviews
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data collection issues antitrust law and
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the reliable interest entity vi
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structure that are affecting all chinese
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stocks because of all the current
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chinese regulatory crackdowns chinese
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internet stocks represented by the
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cringier csi china internet etf here
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have plunged as much as 50 from the
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recent peak this year in this video i'm
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going to talk about are chinese stocks
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already near the bottom and when will
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chinese stocks recover i will cover
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these topics in this video are chinese
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stocks still uninvestable and too risky
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now have chinese stocks bottom ready
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when will chinese stocks recover what is
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the worst case scenario what happens
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when chinese stocks are delisted and
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what is my portfolio strategy going
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forward if you like this video make sure
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to smash the like button subscribe and
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turn on the notification button i will
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continue to make many excellent stock
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analysis and investing videos every week
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that will help you become a great
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investor also if you like this channel
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and want to support it check out my
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patreon blog in the video description
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and become a vip patron you'll be able
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to follow all the stocks i'm buying for
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the long term watch exclusive investing
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weekly videos and download the latest
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intrinsic value calculators for all the
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stocks i'm analyzing so you know when
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the stock is currently overrated fairly
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well or undervalued the link is in the
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video description take a look let's
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start if you're interested in chinese
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stocks like me the most important
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questions you may ask are are chinese
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stocks uninvestable and too risky now
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are chinese stocks at well you trap or
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are chinese stocks substantially
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underway now there are two perspectives
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to this the first perspective is that
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chinese stocks are too risky and
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uninvestible even if they're
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substantially underwearing now the
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second perspective is that chinese
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stocks are too undervalued to pass now
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and that they should eventually recover
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even if there will be more chinese
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regulations going forward personally i
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believe we should look at both
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perspectives the better perspective and
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the bold perspective to see if chinese
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stocks are uninvestable here's the bare
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perspective if you have been following
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chinese stocks recently you will notice
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that the current chinese regulatory
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crackdowns are affecting all the major
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chinese tech stocks such as alibaba
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tencent holdings baidu jd.com dd global
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and metong there are many regulatory
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crackdowns that are negatively impacting
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all chinese tech stocks now these
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chinese regulations include the
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anti-monopoly law cyber security reviews
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cyber security law data security law
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personal information protection law new
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regulations banning chinese educational
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companies from listing overseas and
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making profits and new rules that will
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limit children under 18 years old to
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play online video games up to three
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hours per week as far as i know there
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will be more new chinese regulations
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going forward no one can predict which
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chinese companies and industries will be
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targeting next george soros one of the
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most famous hedge fund managers in the
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world wrote this article to explain why
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he exited china stocks according to
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financial times he said investors buying
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into the rally are facing a rude
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awakening that includes not only those
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investors who are conscious of what
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they're doing but also a much larger
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number of people who have exposure via
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pension funds and other retirement
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savings then he said in mscs acwi esg
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leaders index alibaba and tencent are
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two of the top 10 constituents in black
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box esg aware emerging market exchange
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traded fund chinese countries represent
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a third of total investments these
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industries have effectively forced
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hundreds of billions of dollars belong
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to u.s investors into chinese companies
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whose corporate governance does not meet
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the required standard obviously no one
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will know whether george soros is right
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until several years later in my opinion
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i believe we should keep in mind all the
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major regulatory risks that are
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affecting chinese stocks now the second
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perspective which is the bold
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perspective is that many chinese tech
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stocks are substantially underwired now
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if you look at how much they have
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dropped from the recent peak in the
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middle of february this year to now for
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example if you look at the crane share
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csi china internet etf here the etf
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dropped as much as 57 from its recent
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peak in the middle of february to now
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this etf mainly invests in china-based
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internet-related companies in my opinion
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i believe many chinese tech stocks are
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underway now if we consider many of them
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have dropped as much as 50 or more from
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their recent peaks this year of course
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there are chinese stocks that are well
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you trapped now that i believe we should
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stay away from wild traps are stocks
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that appear underway with a very low pe
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ratio but there are value traps because
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their businesses are no longer growing
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or they are no longer as competitive as
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before or their businesses have been
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greatly impacted by regulations they
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have no control over for example i would
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consider chinese educational companies
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such as tal education and new oriental
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education and technology as well traps
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their stocks have dropped as much as 90
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since february this year they are now
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banned from raising capital overseas as
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required by chinese regulations they
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will need to turn into non-profit
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organizations so have chinese stocks
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bottom already personally i believe
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there's a good chance that chinese
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stocks in general are near the bottom
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for example if you look at this nasdaq
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golden dragon china index here you can
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see this index has dropped as much just
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50 from its recent peak in the middle of
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february to the middle of august this
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year this index started recovering
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recently since the middle of august if
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we compare the current correction with
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the previous corrections here you can
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see chinese stocks tend to have large
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market corrections every several years
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obviously no one can predict where the
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bottom is but based on my experience in
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most markets a 50 market correction from
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the recent peak will usually cause many
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investors to start investing again
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because they believe the market is near
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the bottom and because they want to
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invest in undervalued stocks such as
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undervalued chinese tech stocks even if
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they still have a lot of regulatory
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risks the next question is when will
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chinese stocks recover historically
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according to this nasdaq golden dragon
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china index chart here the last large
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correction that started in june 2018
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took approximately two years to recover
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there was a smaller correction that
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started in june 2015. it took almost two
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years to recover there was a larger
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correction in may 2011. it took slightly
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over two years to recover then there was
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the world financial crisis that started
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in late 2007. it took this index almost
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10 years to recover again no one can
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predict how long it will take the
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current chinese stock market to recover
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i can only speculate that it should take
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chinese tech stocks two to three years
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to recover personally i don't think it
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should take chinese tech stocks as long
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as 10 years to recover which is what
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happened during the global financial
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crisis that started in late 2007. the
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current regulatory crackdowns in china
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are not as bad as the global financial
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crisis that happened between 2007 and
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2009. i actually went through the global
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financial crisis between 2007 and 2009.
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it was much worse than the current
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chinese regulatory crackdowns what's the
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worst case scenario for chinese stocks
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going forward the worst case scenario is
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that chinese stocks could be delisted
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from the u.s stock exchange going
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forward either because the chinese
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regulators are banning chinese companies
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from listing overseas or because the u.s
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regulators are delisting chinese stocks
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using the holding foreign companies
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accountable act hfca act under the hfca
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act chinese public companies such as
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alibaba and baidu will need to be
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delisted from the u.s stock exchange if
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their books cannot be audited by the u.s
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public company accounting oversight
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board pcaob for three consecutive years
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this means they could be delisted as
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soon as 2024. according to this
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bloomberg article here securities and
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exchange commission chair gary
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chancellor has a warning for hundreds of
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chinese companies that have raised
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billions of dollars in u.s markets
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submit to more scrutiny soon or get
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kicked out in a tuesday interview he
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pledged to strictly enforce a three-year
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deadline that requires chinese firms to
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permit inspections of their financial
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audits if businesses refuse their shares
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could be delivered from the new york
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stock exchange and they nasa as soon as
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2024. i want to show you this bloomberg
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article here that explains how chinese
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regulators could ban chinese public
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companies with a lot of sensitive data
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from listing in the u.s according to
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this bloomberg article here china will
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propose new regulations to block
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companies with large amounts of
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sensitive consumer data from floating
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shares in the u.s china's stock market
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watchdog has two companies and investors
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that envision rules will prohibit firms
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from listing abroad particularly those
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seeking a foreign ipo via overseas
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incorporated entities sectors with less
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sensitive information such as
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pharmaceuticals remain likely to win
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approval for an ipo the regulations
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could be finalized and implemented only
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around the fourth quarter so the agency
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has asked some companies to suspend ipos
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till then i talked about this in my
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previous video china restricts foreign
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ownership and investments in sectors
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such as the internet media
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telecommunication and education in order
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to go around china's restrictions on
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foreign investments chinese companies
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such as alibaba jd.com tencent holdings
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dd global and baidu need to use wearable
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interest entities vies to gold public in
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the us videos are essentially shell
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companies created in foreign
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jurisdictions such as the cayman islands
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when we are buying chinese american
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deposit receipts adr shares such as
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alibaba idea shares we are not directly
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investing in alibaba we are actually
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investing in alibaba's vie xiao company
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thus contractual agreements with alibaba
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in china one of the biggest risk is that
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chinese regulators could ban chinese
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companies from going public in the us
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using the vip structure in my opinion i
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believe the chance of chinese regulators
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spending the vie structure altogether is
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small because it will prevent chinese
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companies from being able to raise
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capital overseas going forward if
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chinese regulators spend vis all
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together large institutional investors
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will likely stay away from investing in
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chinese stocks going forward i believe a
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much more likely scenario is that
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chinese companies seeking to raise
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capital overseas using the vie structure
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will ask for chinese regulators
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approvals first going forward so what
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will happen when chinese stocks are
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delisted from the u.s stock exchange
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this is from bloomberg in a forced usd
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listing firms that already socialized in
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hong kong like alibaba and jt.com can
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migrate their primary listing to the
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city the delisted u.s receipts which can
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still trade off exchange won't be
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worthless because they represent an
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economic interest in the company hong
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kong's open markets and green backpack
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currencies should facilitate the
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conversion holders can sell their adrs
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before they are delisted or convert them
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into the hong kong listing a common
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stock without much disruption a company
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choosing to terminate its adr program
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entirely can also pay out a dollar
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amount to investors if chinese stocks
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are delisted in the u.s investors will
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need to sell their adr shares where
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likely at a much lower price also
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according to this bloomberg article we
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should be able to convert chinese ada
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shares to their shares listed in hong
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kong of course the chinese company will
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need to have their shares already listed
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in the hong kong stock exchange this is
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why more chinese public companies are
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starting to list their shares in hong
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kong now in case their adr shares are
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dislisted in the us chinese companies
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such as alibaba and tencent holding
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staff ada shares listed in the u.s and
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shares listed in hong kong can also buy
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all investors ada shares personally i've
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not tried converting my alibaba tanks
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and holdings and jd.com ada shares into
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their shares listed in hong kong i will
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need to call my broker to find out how
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to convert my ada shares to their shares
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listed in hong kong so what is my
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portfolio strategy going forward last
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year i was very lucky that i sold a
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portion of my alibaba intention holding
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shares because i wanted to free up cash
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in my portfolio i still have alibaba
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tanks and holdings and jd.com ada shares
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in my gold stock portfolio i am planning
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to hold my alibaba tencent holdings and
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jd.com shares for many years because i
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like their businesses and their economic
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prospects i also believe the chinese
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equity market will eventually recover to
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reduce risks in chinese stocks i will
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continue to keep my chinese stocks at
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less than five percent of my gold stock
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portfolio this is just my personal
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preference to reduce risk i will
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continue to invest mostly in the best
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u.s test stocks because i like u.s based
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tech companies the most the main reason
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is that the u.s regulatory environment
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in my opinion is much more stable and
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much more shareholder friendly than the
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chinese market personally i believe it's
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important not to overweight in chinese
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stocks going forward meaning not to
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allocate too much money in china stocks
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even if many chinese stocks are
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substantially undervalued now this is
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because there will likely be more new
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chinese regulations going forward no one
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can predict which chinese companies and
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sectors will be targeted next in the
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future i may consider switching my
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alibaba pencil holdings and jd.com adr
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shares to their shares list in hong kong
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i will need to call my broker to find
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out what is the best way to switch these
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ada shares to their order new shares
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list in hong kong to summarize i believe
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chinese tech stocks represented by
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crankshare's china internet etf are near
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the bottom at the top making this video
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it seems chinese stocks have already
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started recovering recently but if there
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are new major regulations in the
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upcoming months then chinese tech stocks
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could head into corrections again in the
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short term historically the most recent
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chinese market corrections took about
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two to three years to recover now all
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these are only my opinions and my
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analysis based on my research they are
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not financial wise i always say this
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make sure you always do your research
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and do your extra due diligence first
[804]
before investing in anything if you like
[806]
this video make sure to smash the like
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button subscribe and turn on the
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notification button i will continue to
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make many excellent stock analysis and
[814]
investing videos every week that will
[815]
help you become a great investor also if
[817]
you like this channel and want to
[818]
support it check out my patreon blog in
[820]
the video description and become a vip
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patron you'll be able to follow all the
[824]
stuff that i'm buying for the long term
[825]
watch exclusive investing weekly videos
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and download the latest intrinsic value
[830]
calculators for all the stocks i'm
[831]
analyzing so you know when the stock is
[833]
currently overwhelmed fairly well or
[836]
underwear thank you for watching this
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video this video from the intouch
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investor channel and i will see you in
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the next video
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