China’s stock market is struggling to rally from here. The China ETF (KWEB) lost one-third of its value in
2022. The downtrend risks accelerating.
On Oct. 7, 2022, the Biden Administration clamped down on China’s access to chip technology. The new
export rules will permanently damage the technology industry in China.
The Biden administration is targeting China’s technological and military advances. Some of the rules are
effective immediately.
Stocks at risk of falling further from here include Alibaba (BABAF), an e-commerce giant, and Baidu
(BIDU), a search engine invested in autonomous driving. In the last few weeks, electric vehicle stocks in
China fell. Nio (NIO) traded at lows not seen in two years. XPeng (XPEV) traded at new lows. Li Auto (LI)
shares collapsed last week after falling steadily since its June 2022 peak.
Investors need to assess US holdings that are too closely tied to Chinese tech firms. Already, Apple
(AAPL) moved some of its iPhone production from China to India. This is the first step in de-risking its
output away from the country. Apple’s risk management should benefit shareholders.
Your Takeaway
Investing in China is riskier than ever. Tensions between the U.S. and China are worsening.
