To The Moon

Wall Street has shunned China's stock market for its volatility amid the country's economic issues.

A trade war, tough regulations, and geopolitical tensions have made it difficult for investors to navigate, but as tensions ease and AI technology continues to advance, investors are starting to warm up to China again.

According to Goldman Sachs Asset Mgmt, Global co-head, Quantitative investment strategies, Osman Ali:

• China has been a market that has been deemed almost uninvestable for the last year or two.

• That is starting to change, both as a consequence of (a) better growth, (b) reform, and (c) hopefully some easing trade and tariff tensions.

Sell America

Investors' changing opinions on China come at a time when US exceptionalism is increasingly under scrutiny.

• Uncertain tariff policy has left businesses scrambling and cut into profit margins.

• Not to mention, rising US deficit has led to concerns about the status of US Treasury as a safe-haven asset, going forward.

• Lest we forget, the disruption that DeepSeek caused earlier in 2025, leave investors wondering if US technological supremacy was as unrivaled as they once believed.

A more optimistic tariff outlook is also boosting optimism.

After US and China dialed down trade tensions, Goldman Sachs :

• Raised China’s 2025 GDP growth estimates to 4.6%, from 4%.

• Raised China’s 12-month outlook for Chinese equity indexes MSCI China and CSI300, pricing in an 11% and 17% implied upside, respectively.

Nomura Capital also upgraded Chinese stocks to a "tactical overweight" in early May 2025. (see above)

As for Morgan Stanley, Chief China equity strategist, Laura Wang:

• She expects an increase flows into Chinese equities within the next 6 to 12 months due to their low valuations and earnings growth outlook.

• She's eyeing increasing willingness among global investors to diversify into China.

• Iterated Morgan Stanley’s upgrade of its MSCI China earnings growth outlook (2025) by +2.0%.

• Observed that there is a declining trend of US exceptionalism.

• Technology breakthrough led by Chinese companies, are potentially pushing up the Return on Equity (ROE) and earnings growth for MSCI China for the offshore space.

China's 'Prominent 10'

While the Magnificent Seven have reigned supreme among US equities, China has its share of powerhouse companies investors might want to pay attention to.

Goldman Sachs recently published a report identifying 10 of China's biggest stock market names (ranging from tech to pharmaceuticals) with a “Buy” rating, dubbed the "Chinese Prominent 10”.

These include:

• $Tencent Holding Ltd.(TCEHY)$ .

• $Alibaba(BABA)$.

• Xiaomi.

• $BYD Co., Ltd.(BYDDY)$.

• Meituan.

• $NetEase(NTES)$.

• Midea.

• Hengrui.

• Trip.com.

• ANTA.

Some of these companies are already making waves both in and out of China.

For instance, EV maker BYD has generated sales comparable to $Tesla Motors(TSLA)$ and has expanded aggressively into Europe and Latin America.

When compared to industry peers in both US and China stock markets, Goldman believes these companies have the potential to :

• Improve their competitive and comparative advantages.

• Generate positive equity returns for shareholders.

• Outperform.

My viewpoints: (mine only)

Despite the China’s central government policy efforts to shore up the economy and red chips’ stocks cheap valuations,

I am unsure about Chinese stocks as investment - long or short term.

Alibaba - Personal experience.

I bought Alibaba on 6 Nov 2020 at a skyhigh price of HKD 285 per share.

• As of Fri, 20 Jun 2025, alibaba closed at HKD $110.80 per share.

• I am sitting on a paper loss of -61.12%. (see below)

Like any credible mega cap stocks, alibaba managed to withstand the years of endless persecution by China’s central government over:

• Abrupt halt of its affiliate, Ant Group's IPO in late 2020; part of a broader crackdown on tech firms. It marked the beginning of intensified regulatory scrutiny.

• Anti-trust competition (fined RMB$18.2 billion).

• 3-year regulatory "rectification" process that included “continuous regulatory oversight” ensuring compliance with new directives and antitrust laws.

Technical Analysis (TA).

As of Fri, 20 Jun 2025:

• Support: HKD $95

• Resistance: HKD $114.43.

• TA suggests a downtrend persists, with bearish momentum indicators.

Recovery Prospects

Recovery to its $298 peak (23 Oct 2020) is improbable near-term because:

• Regulatory Headwinds: Persistent regulatory scrutiny from Chinese authorities continues to suppress valuation multiples.

• Growth Constraints: While cloud/AI segments show promise (+18% YoY), core commerce faces structural challenges (-9% in direct sales).

• Market Sentiment: Technical analysis classifies Alibaba as a "Sell" with negative trend signals.

Uncertainty over “red chips” are mainly due to:

• Chinese economy continual weakness, with (a) ongoing struggles in key sectors and (b) persistent uncertainty about growth prospects.

• China property market, once the pillar of a vibrant economy, is still in crisis after 4 years.

• Weak housing demand, oversupply, and falling prices making recovery unlikely in the near term, despite gallant effort by the government to stabilize the property market.

Compounding these issues, China faces increasing restrictive pressure from the US across multiple business fronts.

This further dampens investor confidence and complicates international operations.

Notably, even legendary US investor, Michael Burry, has recently sold off his entire holdings in Chinese equities, signaling a lack of conviction in the market’s outlook. click here ! for details.

Perhaps the most damning news is none other than the above.

Just in from WSJ, it highlights a growing risk that Chinese companies listed on US stock exchanges could be forced to delist, rekindling fears that had previously cooled.

Tensions have once again reignited, repeated concerns over (a) audit transparency, (b) regulatory non-compliance, and (c) ongoing geopolitical strains between US and China.

Despite efforts to improve oversight and cooperation, Washington’s increasing scrutiny has revived questions about how long Chinese firms can maintain their listings in the US.

The “financial decoupling” between the two superpowers is far from over.

US investors with Chinese ADRs will need to remain cautious, as future access could be disrupted with little warning.

Given these factors, I really, see little reason to consider Chinese stocks as investment, at this stage. Just want to avoid a messy divorce especially if its happens. Never say never, right ?

Remember to check out my other posts. (See below). Help to Repost ok, Thanks.

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