Thanks, I didn’t realize it could limit down. Looks like it’s trying to rally, only down 2% now.
Their volatility index is also reaching new highs.
Was about to post this…it’s logical to expect a drop for indices to near 2020 levels or some decent drops at the very least. This could be similar to how our own VIX is inverse of SPY.
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Looking at some individual Chinese stocks rather than ETFs, there seems to be a pattern of higher than usual volume on April 14 puts ATM. Here are some examples to look at.
- PDD (14 April 25p)
- HTHT (14 April 20-25p): little to no OI, but still higher volume that usual
- BZUN (14 April 5p): same as HTHT I can’t see spreads at the moment, but no doubt they are unattractive.
And so much more. Trend is typically consistent among Chinese tech and e-commerce. To be safe, I would be going with ETFs and there may potential be more downside for the coming weeks.
My feeling right now: some people with a lot of money are in early and this may possibly the next big bear play after RSX.
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JPM’s mass downgrade of China tech and calling the sector ‘uninvestable’ was probably the main catalyst behind yesterday’s big move. I personally think it’s a little overdone but the sentiment is very negative here and it could take awhile to settle.
The delisting fears are probably overdone because a lot of them are dual listed in HK and the ADRs can be converted into HK shares. Additionally, the China regulators are trying to work with the SEC and I think it’s more likely that they will jointly agree some form of resolution than not
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This is the kind of list Jamie Dimon’s progeny would put together if they were a nepotism hire, had sub-par intelligence but somehow just completed an MBA, and thought playing musical chairs with various valuation methods for a set of China tickers was the best way to impress daddy.
What garbage. The kind that underlines why it’s difficult to take any analyst seriously as anything other than a reliable lagging indicator.
China stocks are cheap. Alibaba, Baidu, Tencent etc. are almost criminally cheap based on fundamentals. But first CCP had to take the ham-fisted approach to control big tech, then talk of delisting started, and now there are whispers of sanction contagion from Russia. A perfect storm for stock prices to sink in.
This is a list I was tracking, hoping for better days. Not the same list as Dimon Jr, but enough overlap to make the point. To me, these make the case that there isn’t much wrong in terms of fundamentals, although one could argue that the EVs are a little chubby.
Valuations
Growth Metrics
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At what point do you turn bullish on China? Once covid and Russia fears abate?
How much further do you think Chinese stocks could fall?
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Careful with entries today, like RSX, these like to track SPY during market hours.
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More China covid news coming out.
I took a position in a couple China ETF’s mentioned above (thanks Ni for getting these out there)
FXI 4/14 24
KWEB 4/14 20
Both are slightly red right now after I averaged down a bit from my initial position. Will continue to monitor and update as I see them. Plan to hold these for a few days at least but if they get decently profitable I’ll most likely sell and reposition as I think China has some room left to go down especially with Covid cases and current market conditions. Looks like a lot of dip buying today pushed these both back up but I’m not sure the dip is done yet. This is my only play other than spy puts right now.
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The challenges with Chinese stocks are much deeper and longer running, so unsure when I would go back in. And frankly it might be never.
The VIE structure almost all Chinese companies have used is in trouble - it was a workaround because Chinese regulations strictly limit direct foreign investment in companies, and both the US and China are clamping down as of last year. The US because of accounting irregularities, and China because it led to a ridiculous tech bubble for even completely worthless companies.
Geopolitics complicates things, and one option that is looking more and more likely is the complete delisting of all these Chinese companies and relisting in HK. That is an insane amount of uncertainty, and no rational investor would want to take on that, except for pure speculators.
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Well… this happened. China markets rebounding much after supportive statements from the government.
Technology stocks led a blistering rebound in Chinese markets, with some shares in Hong Kong jumping more than 20%, as investors seized on supportive comments from top Chinese economic policy makers.
Chinese officials said they would “coordinate pandemic prevention and control and economic development, keep the economy operating within a reasonable range and keep the capital market running smoothly,” according to a report on Wednesday by Xinhua, China’s state news agency.
(Source)
RIP Puts, but perhaps an opportunity to play ETFs ASHR, FXI and KWEB, and individual tickers like BABA, BIDU, PDD, NIO and LI. IV is high for all of these and for most, only some subset of strikes will have enough liquidity.
They have all fallen quite a bit this last week, so hoping at least some of them sustain the rally into the day.
Any other tickers we should keep in mind?
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Thinking of playing the large cap rebound here (FXI) since it’s still down quite a bit even after being up 11% today. I think it has more upside based on how it’s major holdings are performing (up 20-40%) and may need a couple of days to completely rebound. Large cap ETFs are generally never volatile to the upside in comparison to the downside like RSX for example.
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Might follow and by an april call to hedge the puts I’ll be bagholding at open.
Only problem is IV. So I’m going to keep it ITM and in April.
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JD,XPEV
SE (not chinese but it always suffers or gets bounced in sympathy with what is happening there).
Btw, JPM’s downgrade of BABA to $65 valued it based on a 7x P/E and excl. its net cash and investment portfolio 
IQ (iQIYI) could continue to be a play. Up 45% on the day.
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There is still a possibility that two other catalyst are playing out for your puts, depending on the expiration date.
- Any additional news / updates on the potential delisting of stocks from the SEC
- China deciding to actively and visibly supporting Russia in the Ukraine (NATO) conflict
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What are everyone’s thoughts on China right now in the short term, continued upward momentum with money printer being turned on yesterday? Just trying to figure out if I need to dump these outs and move on or if they’re worth holding since they’re 4/14’s
I’m holding mine for now, largely because they’re 4/14s. There are still a couple of negative catalysts that could pop up. Not to mention, I’d expect at least some pull back after running +30%. Not sure we’ll get out green, but hoping to negate some of the losses.
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