What Just Happened With Chinese Stocks?

Chinese stocks have rallied recently, leading many to wonder if now's the time to invest. Today I go through the updates we're seeing.

DISCLAIMER:
This channel is for education purposes only and does not constitute financial advice - Richard is not responsible for investment actions taken by viewers. Please seek out a registered advisor if you require assistance (while Richard is a registered portfolio manager at WDS Investment Management, he does not provide advice through The Plain Bagel, which is not affiliated with his employer).

[mikegb]

I can tell you exactly why Chinese stocks have rallied recently. It's because I sold my Vanguard Emerging Markets Index fund earlier this year, after holding it for over 10 years. Somehow stocks know. Right after I buy, they go down. Right after I sell, they go up. Every time.

[sigor]

What is really funny is that my Chinese friend always said that Chinese market has 10 years of bear market, then 3 days of bullish market and back to bear.

[alihossan]

I've tried investing in various things that didn't work out as I hoped. Now, I'm looking at ETFs as a more reliable option. What are the best 5 ETFs for a beginner looking to invest a lump sum?

[PXAbstraction]

It's still hilarious to me that this government continues to call itself communist with a straight face.

[TonyPantoja-mh]

I plan to retire at 62 in another country outside the US that is free, safe and very cheap with a high quality of life. I could fully just rely on only my SS if I wanted to when that times arrives but I'll also have at least one pension, a 403 (b) and a very prolific Investment account with my Tracy Britt Cool Consulting my FA. Retiring comfortably in the US these days is almost impossible. I honestly don't understand why people don't move to another country when they get older in retirement. It seems everybody has excuses for almost anything to not take action to better their situation.

[Fireballof]

I've been lucky enough to visit China a few times over the years, but I knew from those trips that the investment mindset in China is fundamentally broken. I walked through a bustling shopping street and into a kiosk style mall (think a ton of small shops, each will roll up shutter doors). The mall was 1/2 empty on the main floor and 90%+ empty on the upper floor.
I asked my local traveling companions "why are so many of these shops empty, especially with all that shopping happening outside?"
The answer "oh, most people bought their shop space and are holding it in case the mall gets redeveloped / sold, because then they can get a big payday"
Holding empty commercial space, refusing to rent it out (because that's a "hassle"), because some day someone may want to knock down the building and you might get rich.
They don't want their money to work for them, they want their money to magically multiply.

This stock gain is already losing steam and coming back down. I'm curious to see if it falls all the way down to where it was before it started...

[anush_agrawal]

The entire chinese market is like gamestop. Rallied for no reason other than hope and then fell when institions pulled out. The bull run barely lasted for half a month.

[gns]

Don't touch Chinese stocks unless you love to get rag pulled

[DerPortiMorti]

China's economy and stock market are bound to further fall behind. I have lived in China and a master's degree from a top Chinese university. Nonetheless, I have almost completely "China-proofed" my portfolio and divested from Chinese assets. Apart from the historically apathetic Chinese stock market returns (compared to S&P500 or ACWI), here are a couple of reasons why:

1. Inept economic policy-making by the Xi administration since 2012 and the CCP's prioritization of its own survival over the good of its economy/people. Read David Shambaugh, "China's Future" (2016) for reference on how Xi has put China on a backward path. The CCP will never put in the necessary socio-economic structural reforms because they would eventually endanger CCP rule. This will not change for China until CCP meets the same fate as the Bolsheviks.

2. Inept Chinese foreign policy-making since 2008-2009 leading to the West finally taking China seriously as a competitor. Particularly the US has been relentless since the Trump administration in doing everything to deny China technological leadership. There are of course ways around sanctions, but in the long term it is just to expensive and inefficient to pursue this semi-autarkic economic path just for the sake of establishing regional/global hegemony. The latter only serves the CCP and its powerbrokers, but not the populace (or the Chinese stock market).

3. "Emperor has no clothes." Chinese economic statistics are IMHO complete BS. Chinese statistics always had to be taken with a grain of salt in the past, but in the last years the government has stopped publishing countless important indicators. Government agencies are scared of transparently reflecting the true state of economy because it would both paint a bad picture to outside parties and enrage their own inept leadership. Not only is this intransparency generally a bad sign, but it also deprives economic decision-makers of important data to make correct investment and business decisions.

4. China's demographics are tremendously bad for future economic outlook. Due to one child policy and overall demographic trends, the working age population is already shrinking and the number of retirees will spike starting in 2030s. China's social safety net and retitement funding is far behind developed nations, meaning a lot of needed investment into the economy will be crowded out by Chinese youngsters having to take care of their elders (both in terms of time AND money). China is growing old before it can grow rich. This in itself is not a problem, but in combination with the issues stated above I find it unlikely that this will not lead to major socio-economic issues.

[nikevisor]

Getting a Temu ad right before this is too perfect

[prinnyexplodes]

It collapsed again. It is doing a big yoyo right now and trying to stabilize. The irony is a lot of Chinese investors who were burned for 8 years are now selling to domestic buyers lol.

[benlibodi]

Chinese stock market has been a punchline in Chinese sitcoms since like 1999. It's about as synonymous with a sucker bet as it gets, second only to Chinese soccer teams.

[dreamcrafter]

They are creating a new bubble... The Greek economy did the same thing around 2000... Pressure from the changing economy forced people to move their investments from real estate to the stock market... then it ballooned with everyone opening trading accounts, only to lose most of their money a few months later.

[angelyeaa]

“Short everything that guy has touched, I want a half billion more in shorts”

[joyg]

At the end of the day China is not a capitalist country. Their government might allow some capitalist style engagement, but they can change the rules anytime they want if they feel it's in the best interest of their country. Invest at your own risk.

[toddknode]

I don't know how you can invest in a country that does not have rule of law and everything is subject to the whims of one guy.

[profanegaming]

Investing in the market of a country that actively fudges its own currency is so damn funny

[PhongNguyen-izsj]

So, the Shanghai Index went from closing @ ~2700 to ~3500 (~30% rise). Today shows that 3500 is now ONLY 3200 (~--10% loss). We'll have to wait and see if the stimulus is sustainable before calling it "fixed". IMO it will NOT hold. The foundations are rotten to the core.

[zukritzeln]

As you said, the underlying issues dragging on the Chinese economy are still there. So all this will do is create yet another bubble in their asset prices, similar to what COVID payments did in western countries. The only thing really propping up the economy at the moment is the CCP through subsidies and other fiscal stimulus. The real question is how long the CCP can afford to keep doing that.

[barrybobert]

I like how every thumbnail is your face looking disappointed that you have to explain something that should be common knowledge.