How cheap are China stocks?

China stocks had a bad 2021. Just as investors thought that things should get better in 2022, China stock market plunged even more. The China stock market keeps getting cheaper, especially the tech ones. Let's look at some statistics to see how cheap China stocks are.

The Hang Seng Tech index was launched on 27 Jul 2020 and has dropped 50% since that day. Bloomberg reported that the KraneShares CSI China Internet ETF has wiped out all the gains in the 9 years since its inception.

The total market cap of the component stocks in the Hang Seng Tech Index is US$1,067 billion. Amazon has a market cap of US$1,538 billion. This means that Amazon is larger than 30 stocks that include Alibaba, Tencent, Xiaomi, Meituan and JD.com, with another $471 billion to spare to match the combined market cap of ICBC, Bank of China and BYD.

Apple has a market cap of US$2,600 billion and it is more than the market cap of Amazon plus all the Hang Seng Tech Index components.

Alibaba has dropped 50% twice. Alibaba (BABA) hit a high of $319.32 on 27 Oct 2020. It reached half of its value of $159.66 on 20 Aug 2021. That was 297 days apart. It dropped another 50%, 206 days later, to $79.83.

$Alibaba(09988)$Alibaba's offer price in HK listing was HK$176 in 2019. The share price now is at HK$71.25, or 60% below its offer price. As for the US listing, the share price of $76.76 is just 11% above the IPO price of $68. Almost 8 years have passed and that returns about 1.5% CAGR, worse than CPF OA interest.

$TENCENT(00700)$Tencent is trading below HK$300, that is worse than the Covid low of HK$323.40. The last time it was trading at HK$298 was in 4 Jan 2019. So Tencent is at its 3-year low despite growing its EPS at a CAGR of 30.4% in the past 3 years.

Tencent PE ratio is at 12x. This looks like a value stock's PE ratio, not befitting a big tech growth stock. Tencent average PE ratio in the past 10 years is 39x.

Even if you have seized the opportunity to buy Ping An Insurance at HK$64.50, the lowest point during the Covid crisis, you will still lose money today as it is trading 28% lower at HK$46.35.

It is rare to see tech stocks trade below their book value. They usually trade at many multiples of their book. But here are some China tech stocks with PB ratio below 1: Tencent Music, Lufax, OneConnect, Agora, Huya, Douyu, Joyy, Vipshop and Baozun.

Of course, what is cheap can get cheaper. It definitely doesn't feel good if you are holding China stocks.

If you have regretted buying these China stocks and have given up hope on China, you can look for better alternatives - sell your China stocks and switch, no matter how much losses you have incurred. You don't need to make back the money from the same stocks you lose it.

If you are still bullish about China's future and want to hold the stocks, stop watching the markets. Be patient and wait till 2030, whereby China is expected to overtake the US to become the biggest economy.

If you have spare capital and want to buy more China stocks, you can buy those long-term holdings when you think the price is cheap enough. Or you can apply some technical analysis to determine a rebound before buying.

If you have regular capital coming in to buy China stocks, you can keep buying to average down. But you need strong psychology to keep adding.

Tough times will happen time to time in the markets but they don't last forever.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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  • MoonJin
    ·2022-03-17
    Trust your own judgement, after all nobody is going to be responsible for your losses.
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  • 来真的
    ·2022-03-17
    Recent good news from the Chinese government that they will prevent the market from collapsing should signal a bottom is reached
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  • Joelchua
    ·2022-03-17
    This is great perspective. No doubt about the long term future of China and companies like $Alibaba(09988)$. Yesterday the markets rallied on China as if they were penny stocks. 100% sentiment driven
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  • Oldhead
    ·2022-03-17
    The fundamentals of major Chinese stocks are good, but there are too many interference from both the Chinese government and the foreign governments. The latter are all merely for political reasons.
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  • jat
    ·2022-03-18
    to wait for 2030 is another "bet"... it may over take 🇺🇸 mkt but 🇨🇳 is still state controlled and not exactly a mkt which allow mkt demand and supply to take its course
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  • jgaldon
    ·2022-03-18
    Future is in Asia, simple combination of education standard  and principles. Just mindful of playing Asias future in USD and watching netflix ...if u know what I mean
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  • WH the great
    ·2022-03-18
    Dirt cheap. But i have faith in these companies and i nimble little by little 😁
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  • Mingling8885
    ·2022-03-18
    Really glad that the stock market could still recover. Would be bad if fear is too much and everyone starts hoarding cash like the depression
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  • hjmac85
    ·2022-03-19
    China stocks now Very cheap! U miss it now u regret it in future
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  • Asphen
    ·2022-03-18
    PE ratios does not work when it is policies and tensions at play 😀
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  • Nasmeshnik
    ·2022-03-17
    Second day is a good rocket) Asia stocks want a return to the moon ?)
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  • StaQ
    ·2022-03-17
    going by traditional stock analysis does not work anymore. many stocks are overpriced. and demand for China stocks are as volatile as bitcoins...
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  • Dman5
    ·2022-03-18
    Is tine to buy donnot fear
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  • liverpool777
    ·2022-03-18
    need longer observation.
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  • Shirleyopy
    ·2022-03-18
    Need to watch out yr portfoilo sizing
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  • CY Tan
    ·2022-03-18
    Hope the current price has hit the bottom and don’t go down further.
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  • 1994c673
    ·2022-03-18
    Have think carefully before making decisions as no one will be responsible for your losses
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  • asr68
    ·2022-03-18
    as us govt support its market, so does the chinese govt
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  • Wenyaoo
    ·2022-03-17
    Thanks for sharing
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  • Huiqi13
    ·2022-03-17
    China stocks are underpriced now
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