Hey 5-Star Trader,
Despite our stock market operating within the United States, there are countless different countries with companies that have tickers we can trade. One of the most common questions I get is, “What is my opinion on Chinese stocks and do they ever make it into my portfolio?”
The short answer is no and here is why…
The technicals don’t back a setup. Tickers like KraneShares CSI China Internet (KWEB), Alibaba (BABA), JD.com (JD), and Tencent Holdings (TCEHY) have all recently broken down on daily and weekly charts below where I’d consider any buying opportunity. Generally my last line in the sand is at the 200 simple moving average on the daily and 50 simple moving average on the weekly.
Furthermore, the macros don’t support a setup. Any type of government control, particularly that of China, will most definitely have a negative impact on profits. Why invest in an area that is going to have growth stifled? Our U.S. tech stocks, including social media stocks, semis, and more, are all significantly outperforming any Chinese name, so why bother?
I understand recent pullbacks can look enticing, but I am staying out of these names. I think traders are looking at the China stocks and hoping for another rally like what we got in the U.S. stock market post-March 2020 and wishing and hoping for another similar buying opportunity. I don’t think it’s going to happen.