To The Moon

On December 16th, former President Donald Trump spoke about the potential for US-China cooperation during a press conference at Mar-a-Lago in Florida. He stated, "China and the US can solve all the world's problems together. Think about it; it's important," emphasizing the significance of collaboration between the two global powers.

Market Reaction:

Following these remarks, both Hong Kong and Chinese stocks experienced modest gains. The response reflected optimism among some market participants about the possibility of improved US-China relations, which historically have had a significant influence on the performance of Chinese equities. However, the gains were relatively limited, underscoring a cautious attitude among investors.

My Perspective:

Despite the positive tone of these statements, my outlook on Chinese stocks remains unchanged. Here’s why:

1. Words vs. Actions: While dialogue is essential, rhetoric alone does not translate into tangible policy shifts or economic impacts. Until concrete measures are implemented—such as the easing of tariffs, resolution of technology disputes, or better regulatory conditions for Chinese companies in US markets—the statements are unlikely to influence my investment decisions.

2. US Policy Uncertainty: Over recent years, US-China relations have been characterized by volatility, with competing economic and geopolitical interests frequently dominating the agenda. For instance:

   Trade Disputes: Tariffs and trade restrictions remain unresolved, creating long-term headwinds for industries reliant on global supply chains. Tech Rivalry: Regulatory crackdowns on technology companies and competition over semiconductor production continue to escalate.

3. China’s Domestic Challenges: Even with potential improvements in US-China ties, Chinese equities face hurdles domestically, including:

   Slower Economic Growth: China's economy has been cooling, with weaker consumer demand and a sluggish real estate sector weighing on growth. Regulatory Overhang: Government crackdowns on various sectors, from technology to education, have eroded investor confidence.

4. Global Macro Environment: Broader market conditions, such as high interest rates, geopolitical tensions, and shifting global capital flows, add another layer of complexity. Chinese stocks are not immune to these pressures, which could limit their potential upside regardless of diplomatic developments.

Why I Remain Cautious?

• Skepticism Toward Short-Term Gains: A few positive remarks, while encouraging, do not constitute a meaningful shift in the structural challenges facing Chinese equities.

• Lack of Concrete Policy Alignment: Without substantive changes in US-China trade policies or indications of collaboration on pressing global issues, market optimism may be short-lived.

• Focus on Broader Fundamentals: My investment approach prioritizes strong fundamentals and clear growth drivers, which are currently overshadowed by uncertainty in the Chinese market.

Final Thoughts:

While improved dialogue between the US and China is a step in the right direction, it is far from a guarantee of sustained improvement in market conditions. For now, talk remains just talk—an insufficient basis for revising my investment strategy. Until these conversations yield actionable outcomes that positively impact policies and economic realities, I will remain cautious about the prospects of a sustained rally in Chinese stocks.