Hot Chinese Stocks Like Nio, Alibaba, JD Are Falling On US-China Relations, Regulatory Concerns And Research Firm Says Institutions Are Buying The Dip
Despite mounting regulatory concerns and strained U.S.-China relations, institutional investors are buying into Chinese stocks on the dip, CNBC reported on Thursday, citing fund research firm EPFR Global.
What Happened: China-focused funds recorded net inflows worth $3.6 billion in the week ended Wednesday of which $300 million was dedicated to China tech funds alone, as per EPFR.
EPFR tracks over 134,000 traditional and alternative funds with more than $49.5 trillion in total assets.
Flows into U.S. stock funds were about 0.1% of assets under management at the beginning of the week, compared with a little over 1% for the Chinese, the report noted, indicating continued investor interest despite concerns.
Why It Matters: U.S. listed Chinese stocks such as Alibaba Group Holding (NYSE: BABA), Tencent Holdings (OTC: TCEHY), JD.com Inc (NASDAQ: JD), and Nio Inc (NYSE: NIO) have over the last several days plunged as Chinese authorities increased scrutiny on tech companies over monopolistic practices and data security.
China has however attempted to calm the sell-off, saying it will continue to allow Chinese companies to go public in the U.S. as long as they meet listing requirements.
As per Nomura analysts Jialong Shi and Thomas Shen, the regulatory environment will remain tight this year but the recent sell-off provides a good entry point for long-term investors, CNBC reported.
The Nomura analysts’ top picks within the China internet sector are Alibaba, JD.com, Tencent, NetEase Inc (NASDAQ: NTES), Weibo Corp (NASDAQ: WB), and Joyy Inc (NASDAQ: YY).
Price Action: Alibaba shares closed 0.78% higher at $197.54 on Thursday.
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Keep in mind that China is still very much a Police State, run by a seriously communist government.
Thus it is different from whatever we are familiar with and able to trust.
The basis for government actions and policies are not the same nor are the intended results similar.
Given that reality, it is still possible to invest, and possible to have positive net returns from those investments some times. But also understand that the show is not being run for the investors benefit. This means that there are additional risks involved beyond what exist in other investments.So beware!