To The Moon

US markets continue to trek higher this week. In fact, after looking at the price movement yesterday, I was of the view that Nasdaq 100 will make another all-time high even before Jerome Powell's speech for Jackson Hole. With points level at 15432, readers who read my articles and posts since the beginning of this year would have noted that my price target of 16,000 is likely to become a reality. Rather than to cover more on what Jerome Powell had spoken yesterday, I would touch on another interesting area, which even I myself was caught by the sudden tide that hit numerous hedge funds that invested in Chinese stocks.

Since the Bill Hwang's saga back in March that led to a quick meltdown of Nasdaq 100 futures and several stocks from large to small cap US and Chinese stocks, a number of US based stocks have hit multi year highs. For instance, Apple, Amazon, Facebook, Alphabet, Upstart, etc have made recent highs within this month or two. In fact, naysayers of the US equities markets continue to say that interest rates are at all time low and asset tapering program will lead to a burst of the bubble. True enough that valuations are getting rich for some stocks but there are also those that are fairly valued given the growth rate of the economy and the individual company's growth rate.

Nasdaq 100

Russell 2000 ETF

HSI

HANG SENG TECH UCITS ETF

However, Hang Seng, Hang Seng tech and other Chinese markets continue to come down and are at critical price point and levels now. Seriously, people have been telling me that no one can predict the market. Guess they are first time readers of my articles since I have on numerous occassions mentioned in my articles that I work on the basis that I could be wrong. This means no bets are made with the 100% certainty that my predictions are always correct. 

What I am on track to correctly predict the price movement of Nasdaq 100 futures, readers would also recall that my negative view of cryptocurrencies short-term price movement has also led me to miss out the recent rally though I have correctly called for a number of price point movement, for instance Bitcoin breaking 32,000 USD and hitting 28,000 and should it continue to break strongly, it will go down to 17k USD and below. True enough that it did not happen and since I have reminded myself not to shortsell Bitcoin, there isnt any loss except for opportunity costs or potential returns due to the reversal of trend of Bitcoin from 28,000 USD all the way back to around 46,000 USD. During this period, I was busy with my stuff and researching on several stocks to prepare my watchlist should there be a plunge in equities in the next 1 to 2 years, i.e. in 2022 or 2023. Naturally, this is my backup plan though I do have a decent allocation of my portfolio in equities.

While I have correctly predicted the general price movement of equities in US market, I have not factored in one part that arose from China's focus to improve the data privacy regulations in the country. This has led to a fall in my unrealised profits which I had in a number of Chinese stocks listed in US that I had in my portfolio. 

Readers would have known that I had said a few times starting from the night of Thursday that there is an indication of price stabilisation for Chinese stocks listed in US and Hong Kong. Going into Friday, 27 August 2021, I continue to see encouraging signs that Chinese authorities are releasing signals that they are hoping for markets to be stable and supported at this level. 

However, amidst the week of positivity from the Chinese side, I missed out the part from the media, which apparently doesnt seem to be on the side of Chinese markets. It seems to me at least on the theoretical side that the non-Chinese media is hoping for another 1 or 2 or 3 legs down for the Chinese markets.

Right now, at this price level for the Chinese stocks in Hong Kong, there is the possibility of a leg down again for the Chinese stocks at least due to the negative impact coming from the non-Chinese news outlets as well. So for me, I am not adding more stocks given the accumulation of another batch of stocks when Hang Seng index was around 24700 all the way to around 25,700. My current portfolio allocation is still on a relatively safe side as I dont believe to go all in and cash on the sideline is an important portfolio strategy given the current market environment. Question to ask is do we want to chase the rally now? I would go back to basics in the way that one should not overpay for stocks and I will continue to be put on the radar for good companies with fantastic growth rate and good balance sheet.

It is indeed an interesting time for Chinese stocks as Chinese authorities are decisive in their policy directions but at the same time at this price level, they do not want another drastic fall of the markets. This is how I see it given the numerous occassions during which the securities regulator comes on board to share that they are not stopping the listing of Chinese companies in US and they are also working on the work with US SEC to allow the public audit of Chinese companies listed in US. This is at least what I remembered. However, one should remain watchful for the fact given that my theory is there are a few blocs of forces possibly hedge funds who may work behind the scene to influence the Chinese markets to come down another 1,2 or 3 legs down. This is a risk and whether can they do it successfully, depend on how responsive the Chinese authorities are in clarifying such negative news.

Tiger Brokers has so far given up almost up its price gains since Monday and is currently around 12.91 USD. Is it cheap or expensive? I will leave it to readers to decide on this. However, the current sentiment and theory that I had mentioned in the above paragraph may make Chinese stocks having a difficult time to have significant sustained price gains within the coming 1 month. I do certainly hope that I am wrong in this view though price action wise, a number of Chinese stocks may be trying to hold onto support level now. Will the "bad" hedge funds, which are trying to shortsell Chinese stocks in US try to sway the media to "scare" the retail investors as well? There remains a possibility that they may succeed. With lots of uncertainty and unfriendly forces at work, this is really not the time to go all in into Chinese stocks. A more balanced portfolio of equities in different exchanges and businesses, cash, etc may be more suitable.

As always, the above should not be construed as any investment or trading advice.