Is China investible?

No surprises there

The very fact about government intervention on selling by putting curbs speaks a lot about financial health of the markets. It will be interesting to see how much more downside is left once the government intervention is discontinued.


More efforts from Chinese government to stop the carnage!!


Stone !
How below news can be related to near term flow of FII out of india ?
Could this be one off such bets ? They closed “The Asia Genesis Macro Fund” after -18% return in first few weeks of 2024.
What this fund is seeing or a looking at which we might be overlooking ?
I am not trying to be all gung ho on the india story but just trying to understand how FII sees india in the near term, also how should we see the term “near term” itself ? ( months ?, year ?) >

Great question. I’d like to know too :slight_smile:

Fwiw, it’s illegal for foreigners investors to own Chinese stocks. When you buy a Chinese stock, you are actually buying some off-shore company that has a complex contract with the real company in China to receive all of their profits, you aren’t buying the real Chinese company.

CCP can rip up that contract and send all foreign investors to $0 at any point if they wish.

FII View

Even if we did predict (its difficult to make money out of it) how market will react to it is not easy to gauge. We can only prepare, and take our shots by focusing on our behavior and the mode in which we want to manage our portfolios : passive / agressive / defensive.

That fund went short Japan and long China at the same time. Japan rallied and China crashed and it was a double whammy. Probably took this bet at the worst possible time and when long-short trades go wrong they can bankrupt you. Now coming to China people always knew the risks they knew it when Hang Seng was at 30000 in 2021 or rallied 40% early last year. The real question what is an attractive price given the known risks. India is trading at a 160% premium to China (10 vs 26 PE) so wouldn’t be surprised if FIIs feel the price is right to take a dip. Also China just announced a 2 trillion Yuan package to stabilize the stock market


Policymakers are seeking to mobilise about 2 trillion yuan ($278 billion), mainly from the offshore accounts of Chinese state-owned enterprises, as part of a stabilisation fund to buy shares onshore through the Hong Kong exchange link, the report said, citing people familiar with the matter.

I feel this 278 billion $ plan will not amount to much, this rally might fizzle out in some time. What I understand is they are trying to prop up the share prices rather than increasing the companies’ earnings. In my opinion, the economy will only restart when interest rates are cut down.

One more floating theory is Xi Jinping wants society to be more equitable. He won’t cut the rates as it increases speculation and leads to more inequality in society.

There are other concerns as well like the slowing down of the global economy because of high interest rates and the victory of Donald Trump. Some liquidity crunch is even visible in the Indian banking space where major banks are fighting for deposits.

Chinese markets might rally but as of now, I am not comfortable investing a big amount unless there is an announcement of interest rate cuts.

I can be wrong in my understanding. Let’s see how it unfolds.

China curbs short selling

The China Securities Regulatory Commission delivered, with new anti-short-selling rules aiming to stabilize the market going into effect on Monday:

  • Per the new rules, investors who buy new shares will be barred from lending them out within an agreed “lock up” period, effectively closing off the mechanism used to bet against a stock.
  • The move is similar to one China implemented during a similar period of market turmoil back in 2015, when activity from short-selling day traders was deemed as causing “abnormal fluctuations” in the market — a decision that ultimately failed to stem market losses in the following months.

My 2 cents -
Every time a Ruchir sharma equivalent tells you something , pls take a step back and ask whether he has an incentive to tell you what he is telling you . And then look at data yourself before coming to judgement.

How on earth China’s share of global GDP decline compared to US when former is growing at least 200 basis points higher , including in 2023??!!

And we all know that in last 12 months, US growth is funded with extreme fiscal expansion that even led rating agencies to react. Do we think that US has infinite fiscal room to keep pumping money ??

The US has a lot of incentive to not act on high inflation. For one their debts will get inflated away. Something like this happened in the 50s/60s when post world war 2 the US had a lot of debt.

Second the longer inflation remains high, the more money would flow to the US due to higher treasury yields. The biggest moat for a country for AI is the quantity of compute it has. If US remains the most preferred destination for capital then they would have a disproportionate advantage in access to compute.


so shanghai index suddenly jumped +7% from lows during January end , during ongoing week it jumped +6% from lows ( however the trajectory of subsequent lows were lower …dunno how to say it :crazy_face:).
what can be read from it ? is it all news hopametamine or there are genuine movements in businesses ?

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Invested quite a bit of money into hang seng index etf. Valuations are mouthwatering. Expecting a doubling in 3-4 years Let’s see how it goes.


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@Gautam_Chopra accounting credibility of that a big? figures of Nominal GDP may also be false. Smart money doesn’t have China in its map, as of now. So careful. Thank you.

Yeah margin of safety Vs Value trap is always something to be careful of. Everyone know its a cheap valuations vs history. But if China govt keeps doing sudden things then it becomes a trap for sure.

That risk is always there. But recent actions of Chinese government show that they are trying to stabilize the equity markets. Hopefully they have realized that random government actions targeting sectors have extreme negative effects on economy and merkets.
There is always a reason why markets are selling this cheap,if everything was hail and hearty prices will be sky high.It depends on individual to individual if he is ready to take the risk and place the bets.

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In one or 5 yrs investors will come back to china. But the problem is whether there is certainty that there won’t be any restrictions from India or china(enemy state)?
There is full possibility of restrictions considering the ban on Chinese apps in the past. So your returns could literally go to zero. Please feel free to counter.

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