Year in review and bull case for China pt. 2

Submitted by zhumxc123 t3_10013kn in wallstreetbets

6 months ago, I made this bold post named Bull Case for China. https://www.reddit.com/r/wallstreetbets/comments/vtotgm/dd_bull_case_for_china/

The day after I published the post, CSI 300 (ASHR) & BABA, took a dive 3% and 9% respectively. From there, it was an extremely painful 2 months, as my pair trade of long Chinese and short US equities backfired spectacularly with SPY rising 12% in 1 month while ASHR and BABA went down 8% and 15% respectively.

Currently things are looking better, with short positions on SPY and QQQ more than offset losses from going long on Chinese equities.

I'm still bullish on Chinese equities:

- China reopened, retail sale data for January / February should be interesting to watch and can be a huge catalyst. It is always the darkest before the dawn.
- Real estate developers stabilized with greater access to credit, however this should put a downward pressure on house prices as more inventory gets delivered, putting a damper on consumer sentiment.
- Dovish central bank is set to lower rates again next year with even looser financing conditions.
- Even though Xi crowned himself king, government repeatedly signalled support for private enterprises and there's no u-turns from its previous directions.
- Short positions / negative sentiment on ASHR has been decreasing (below is the amount shares lent short from my account)

https://preview.redd.it/drncfbcj6a9a1.png?width=951&format=png&auto=webp&s=4e19d2332df35155437d7e594fabe9bd83da100c

I'm still negative on U.S. equities:

- Fed will hold rate constant @ ~ 5%, unless something truly breaks, rate will hold there for a long time until QT drains all the excess cash from the system, which could take 1 - 2 years. With ample reserve policy, it will be hard for something to truly break since there's always ample liquidity.
- BOJ "raised" 10 year interest rate from 0.25% to 0.4-0.5%, and with inflation hitting Japan domestically, its highly likely BOJ will abandon their YCC policy next year, which will put upward pressure on bond yields across the world.
- Assuming current 4 - 5% interest to continue for 1 - 2 years, and there's no meaningful growth in earnings, US equities (especially QQQ @ 25 P/E) are not attractive compare to short term bonds.

Current positions:

https://preview.redd.it/8md14x5v6a9a1.png?width=1178&format=png&auto=webp&s=548dec96030cfba06f319cef4fcde041e7dd9958

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4troglodyte t1_j2ey6y3 wrote

China will be a shit show in 2023 and any investments there will generate horrible returns. Place your bets and spin the wheel🙈

11

y90210 t1_j2f3x2f wrote

Can't believe someone is telling us to stay away from S&P while dumping half their funds into BABA.

15

Cutlercares t1_j2f12xr wrote

I think China stopped reporting covid data for a reason. I think you are at least 6 months early on this position.

Time will tell.

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VisualMod t1_j2et0dr wrote

>Your analysis is interesting. I will keep an eye on Chinese equities.

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VisualMod t1_j2eszsv wrote

User Report
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Account Age 3 years [^scan ^comment ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_comment&message=Replace%20this%20text%20with%20a%20comment%20ID%20(which%20looks%20like%20h26cq3k)%20to%20have%20the%20bot%20scan%20your%20comment%20and%20correct%20your%20first%20seen%20date.) [^scan ^submission ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_submission&message=Replace%20this%20text%20with%20a%20submission%20ID%20(which%20looks%20like%20h26cq3k)%20to%20have%20the%20bot%20scan%20your%20submission%20and%20correct%20your%20first%20seen%20date.)

^^Discord ^^BanBets ^^VoteBot ^^FAQ ^^Leaderboard ^^- ^^Keep_VM_Alive >TL;DR: Stay long Chinese equities, short US equities

1

hartfordclub t1_j2euhtj wrote

I think China will do well esp w reopening and all these depressed valuation. Good analysis. 👍

1

MinaKovacs t1_j2f756m wrote

The Chinese economy still depends heavily on exports to the US, which are only going to get worse. With the recession next year and the continued migration of manufacturing out of China, any investments there will be like throwing money into a burning dumpster.

1