Right, Enough is Enough.
I have long been a strong supporter of investments in China, but what has happened this quarter has been too much to take. Yesterday I closed our few remaining equity positions in Chinese companies on US exchanges and today I plan to do the same in HKG; following the actions of Ark investments and others who have simply had enough of the instability, and uncertainty surrounding investments in China.
When the intrinsic value of a company, and its financial numbers begin to become irrelevant, and price movements are instead determined by arbitrary adhoc actions it seems that it is time to move on, and look for an instrument or investment that can provide some degree of normalcy.
It is sad that as an investor with great belief in the Chinese market that I am forced as many others to walk away but honestly, enough is really enough.
$BABA (Alibaba) is now trading at less that its IPO price on HK markets, following an unbelievable dip this quarter, $BIDU (Baidu, Inc.), $0700.HK (Tencent) and a host of others seem to be heading into the abyss. Fortunately our exposure to the Chinese market was never more than 8% or so but the losses racked up on Chinese companies has still been telling this quarter. From tomorrow our exposure will be 0%.
On the one hand I believe that no dip this crazy can continue and that in a few months Chinese stocks will have rebounded hard but on the other hand the tensions between China and the USA don’t seem to show signs of abating. Unless we see a firm improvement in relations between the two I think the risk of things escalating even further are high. The controversy over the structure of these shell companies remains, as does the potential risk of delisting.
Based on all of the factors we have witnessed this month the prudent action seems to be a controlled exit from China, at least in the near term. Better to cut losses, and reinvest in future dips in markets that are more predictable at this juncture.