When China abruptly canceled Alibaba’s Ant Financial IPO, it signaled a policy change. The government prioritized responding to Jack Ma’s criticism over capitalism and cash-raising from public markets. The government continued to add new regulations on Internet firms. This is in the name of protecting its people and for Common Prosperity.
Last week, China told Didi to delist from the U.S. markets and seek a listing in Hong Kong. That is the last straw.
Investors who are sitting on losses of up to 50% should consider giving up. By selling now during the tax-loss season, investors may book the loss. When investors realize the losses, they may re-enter Chinese stocks at potentially lower prices.
China stocks may attract bottom-fishers but not enough to end the downtrend. For example, Pinduduo (PDD) and Bilibili (BILI) are at fresh lows. Speculators may bet on a bounce. Tencent (TCEHY) already trades on the over-the-counter exchange. If the SEC forces VIE-structured firms to de-list, Tencent is still the most attractive.
Netease (NTES) and JD.com (JD) have sound businesses. Investors who do not want to look back at buying China stocks will avoid NTES and JD, too. Conversely, investors who want to hold the few remaining investable companies may consider them.
