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Gambling On Mao
We're all supposed to be buying Chinese stocks, apparently.
The bull case goes something like this. Once people stop dying by the hundreds of thousands, domestic demand will recover. The government's avowed commitment to fostering growth in 2023 means the days of Xi deliberately undermining the economy in pursuit of various social agendas and pet projects are over (if only for now), and if the developed world dodges recession (or if any recessions are mild), external demand may prove more resil
Buying Chinese stocks is a trade not an investment.
I’m unsure what it is you’d be trading for unless it is risk. If at some point in the future China invades Taiwan that will affect all investments in Chinese equity. I’m thinking that at any time an autocrat can choose to freeze any investments or simply nullify them.
It seems the higher Chinese shares go, the more consensus the “long chinese stocks” trade becomes. Cant recall many (if any) professional strategists pounding the table at or near the lows.
As always, people seem to be hypnotized by stock prices going up and can’t not participate in the action.
Sometimes it is what isn’t being said- i.e. there have not been any interviews with, nor has the world heard much at all from Jack Ma, Pony Ma Huateng or Zang Yiming since 2020/21.
I worry about being invested in US stocks, where a disproportionate share of profits/stock upside goes to the high level execs instead of the equity shareholders. There are a few- such as Palantir, that I would never directly invest in for that very reason. I am absolutely terrified about Xi unilaterally taking the profits. H appears to be well versed in “how the mob works” and I do not ignore the parallels to Xi. There was a short term trade I did in Chinese stocks (this was pre-covid). I was in and out in a few weeks and it absolutely felt like gambling with someone who holds all the cards. I was super bored at the time. Never again!
Hopefully, any traders already got in and then can get out before another one of those notorious 5% drops that can occur in one day on the Shanghai index or even worse that 12% 3-day drop that occurred in the Hang Seng. That was all in 2022.
I wonder if someone smarter than all of us is working on a wealth re-distribution plan less draconian than Xi’s and more so than the rest of the world’s current non-solution. A sweet spot where everyone gets enough and no one gets too much. I doubt it; we’re all pretty smart here, surviving and gambling
Investing in China seems to me like a fundamental bet that China won’t make a serious move against Taiwan. I may be off, but the value of foreign investments in Russia pretty much went to zero after the start of Russia’s “special operation” in Ukraine. McDonald’s ultimately abandoned a business with more than 850 stores in Russia. McDonald’s has more than 4,300 stores in China.
That seems like a particularly bad bet to me. The CCP wants Taiwan and will make its play before adverse demographics and a collapsing real estate bubble make it a more challenging project that it already is.
XI , not letting capitalism run wild… well from somebody sitting in the USA.. that seems like a pretty smart move by Xi
Rick James on the couch! Bravo! We should all dump our EEM shares and run for the hills if Xi ever starts screaming “Darkness is.”