• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Technology

China's Market Jitters Make Me Jittery About Chinese Stocks

It's hard to predict movements in stocks in China, a job made even harder amid saber-rattling over tariffs and trade.
By JIM COLLINS
Jul 05, 2018 | 11:00 AM EDT
Stocks quotes in this article: BAB, TCEHY, AMZN, NFLX, KWEB, BA, CAT, F, GM, BIDU

For my first Real Money column of my Asia trip, I must address the elephant in the room. Pachyderms are revered on this continent, but it's really a different mammal that concerns me.

China is in a bear market. The Shanghai Composite is trading flat this morning, but that doesn't change the fact that the main SSE Index has fallen by more than 11% in the past month. As U.S. tariffs on Chinese goods are set to go into place Friday and the market waits for China's reply, there is fear among market participants. The key for an active asset manager is to differentiate between fear and freak-out, and sometime the main index is not the most useful indicator.

To really gauge the amount of fear in China, I look to the secondary exchanges, the largest of which is Shenzhen. That city's bourse, the eighth-largest in the world by market capitalization, is known for its volatility and prevalence of hot-money stocks. For instance, Contemporary Amperex Technologies, the Chinese electric vehicle battery behemoth, traded limit-up for eight consecutive days after its initial public offering on Shenzhen's ChiNext board. That's a chase, not an investment, and Shenzhen seems to specialize in those.

So, I focus on the Shenzhen Composite (SZSE) rather than Shanghai's, and the numbers there are troubling. Shenzhen is down 13.1% in the past month and a scary 22.3% since hitting its 2018 high on Jan. 24. The presence of ZTE, which was the ninth-largest constituent of the SZSE index as of year-end 2017, is obviously not helping as its shares have plummeted by more than 50% since the Trump administration announced sanctions on the company in April. Clearly, though, Shenzhen is feeling the heat from a general uncertainty over Chinese equities.

It isn't any easier to predict the movements of stocks in China than it is the U.S. -- actually, I believe it is more difficult. However, I am confident that the saber-rattling between the Trump and Xi administrations will continue through the summer. It's a case of headline risk, and I don't see that going away soon.

As I have mentioned in prior columns I am hoping for a pullback in Chinese tech titans Alibaba Group Holding Ltd. (BAB) A, Baidu Inc. (BIDU) , Tencent Holdings Ltd. (TCEHY) , and Baidu-controlled streaming play iQiyi. I missed these stocks the first time around, but I do believe the demographics will produce growth rates for them well ahead of those for the U.S. FANG titans over the next decade. It's always better to buy any asset more cheaply, though, so I am holding off on BABA and the rest for now. Those stocks don't seem to be sensitive to valuation any more than Amazon.com Inc. (AMZN) and Netflix Inc. (NFLX) are, so I'll let sentiment rule the day.

Another way to play the Chinese tech titans is through (KWEB) , KraneShares' China tech stock ETF, which has a massive $1.42 billion in total assets. I believe the KraneShares folks are the smartest guys in the room when it comes to investing in China, and a passive approach serves to reduce risk from individual equities. Timing is crucial, though, and whether one's strategy is active or passive, I believe this is a time for caution on Chinese stocks.

Time will tell if an Asian contagion will impact U.S. markets, but thus far that doesn't seem to be the case. I've mentioned Boeing Co. (BA) and Caterpillar Inc. (CAT) as companies that would be hit in a tariff battle, and a trade war certainly does nothing to help Ford Motor Co. (F) or General Motors Co. (GM) , either. However, the FANG stocks have not been hit, and until that happens the elephant in the room will remain a local issue for Chinese stocks.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication , Jim Collins had no positions in the stocks mentioned.

TAGS: Investing | Global Equity | Technology | ETFs | Funds | China | Markets | Entertainment | How-to | Gaming | Politics | Risk Management | Stocks

More from Technology

China's Moves to Stop Buying U.S. Tech Aren't Going Away - But They Have Limits

Eric Jhonsa
Dec 9, 2019 3:16 PM EST

Beijing is intent on reducing its dependence on American hardware, software and chips. But reducing it and eliminating are two very different things.

The Final 4 Unsightly Stocks Going Into My Next Tax-Loss Selling Portfolio

Jonathan Heller
Dec 9, 2019 12:00 PM EST

We'll track a dozen beaten-up stocks that could be subject to tax-loss selling at the end of 2019 to see whether they can stage comebacks in 2020.

Want a Slice of Apple? You Have Some Options

Bob Lang
Dec 9, 2019 11:00 AM EST

You can buy strategically on dips to avoid getting left holding the bag as prices keep rising.

Time to Take a Risk With Amazon, a Trade With Netflix

Carolyn Boroden
Dec 9, 2019 8:30 AM EST

Here I outline how to play NFLX and AMZN, but the latter comes with a catch.

Here's a Recap of the Small Caps vs. the Large Caps

Helene Meisler
Dec 9, 2019 6:00 AM EST

What just happened last week? Quite a bit, but pay attention to this: For the past two years, the large cap QQQs had been the leaders, but not so lately.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:02 AM EST BOB LANG

    Added Some Peleton

    This stock is starting to gain some traction, the ...
  • 01:06 PM EST CAROLYN BORODEN

    MRK and LVS Targets Coming Up

    View Chart » View in New Window »  LVS View C...
  • 12:01 PM EST BOB LANG

    Rolling Up Apple

    Just the other day we added some Apple calls on th...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2019 TheStreet, Inc., 14 Wall Street, 15th Fl, NY, NY 10005

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login