When talking about investing in the Chinese market, it feels like we’re living in dog years. Every week, it feels like two months have passed. I don’t know if I’m the only one who feels this way.
Anyway, as the title of this email suggests, yes, I’ve increased my Chinese position/exposure.
Before, we get into the details, I just wanted to give a quick shoutout to Moomoo, where there’s a limited time offer for Singapore investors that wish to trade Hong Kong Stocks – it’ll be ZERO* commission on Moomoo for one month.
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Back to the topic – the 24th of September was the turning point for the Chinese stock market.
China’s central bank unveiled the most aggressive stimulus since the pandemic. The stock market reaction? Parabolic.
However, we know that such reactions are short-term in nature – with investors and traders trying to ‘front-run’ and price in different expectations, even without any concrete measures or implementations executed in the real world, yet.
I’ve since discussed the development extensively on my YouTube channel – in case you’ve missed it. I’ve done a 4-part series outlining my thoughts in real-time.
In the meantime, I was even interviewed and quoted in a New York Times article – China’s Policy Reversal Sparks ‘Mind Boggling’ Stock Rally.
I briefly mentioned in the call that I had been eyeing Moutai for quite some time now but had “missed the boat”.
I was this close to chasing the FOMO (Fear of Missing Out), when Moutai was onboard the rocket ship – rallying from $1,245 to $1,900+ per share, in a matter of 7 trading days.
Seven.
But I’ve held myself back.
Because at the back of my mind, I knew that this sort of rally would just be unsustainable. True enough, it pulled back from $1,900 per share to roughly $1,500 today, still a good +24% from its lows (before the Bazooka stimulus announcement).
There were two main reasons that stopped me from buying into Moutai earlier. Minimum lot size, and conviction.
Firstly, Moutai trades in the Chinese A-share market, with a minimum lot size of 100 shares. Meaning to say, even at $1,300 per share – that’s $130,000 CNY. Which equates to roughly $24,000 SGD or $18,300 USD.
That’s too much for a starter position, at least for me. I run a personal, private portfolio.
Secondly, I’ve taken the time to slowly understand the company, and for it to be a $18,000 USD position, I sure as hell must do my due diligence, and I’ve made the call to hold it off because I don’t think I’m ready enough. NOT because the company is not worthy of an exposure.
However, Moutai has been on my watch list for the longest time ever, and I would sure as heck wish to own it, maybe if there’s an opportunity in a pullback in the future – or when I think that I’m ready to accept it. Specifically, from a moat and valuation perspective, Moutai passes most of my criteria.
That said, I did hold true to “my process” of abstaining from any actions – particularly in very volatile periods, for at least 48 hours. In fact, I sat on my hands for more than 2 weeks – thinking through the various scenarios and digesting the new developments coming out from China.
Rather than adding to a new position, I’ve since decided to add to an existing one – and even averaging UP on it.
Yes, I’d averaged up into Tencent.
I’ve taken the opportunity in the recent pullback to add to my Tencent position, and this is the record of my past transactions.
This recent addition is the highest valuation that I’ve added to my Tencent exposure – a lot higher (21% higher) than my first add.
When comparing Tencent in 2022 versus the past two quarters, I think there were strong signs of recovery and positive developments that might continue to surprise investors (to the upside).
All things considered, I believe that Tencent still poses a good investment opportunity for those who understand its business – and I’m happy to share more.
I’m currently working on a video and you can look forward to it in the coming week. And of course, as a subscriber to this newsletter, you get first dips on my real-time thoughts.
I’m interested to know if any of you are also adding to your China exposure in this volatility.
Love,
Chi Keng
I have increased my Chinese stock holdings via US ADR route. The notable holdings are Alibaba, Baidu, JD.com, Tencent Music, BYD, Geely and XPENG. If market remains volatile, then I will certainly buy on dips specially BAIDU.