Author Topic: Investing in China?  (Read 6879 times)

jnw

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Investing in China?
« on: April 13, 2022, 01:29:46 PM »
I've only considered VTI and investing only in American countries.. but wow I just watched some videos of architecture going on in China now and am blown away.  Makes me feel like I am living in a third world country in comparison. I see why the USA wants to expand infrastructure now.

Just wondering how profitable it would be to invest in China.  Is there an index for Chinese stocks like VTI for the USA?  Would be interesting to see the chart.  Or perhaps is everything controlled by the government and the economy isn't great there?   I know nothing about China's economy other than I am blown away by their architecture.

cool7hand

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Re: Investing in China?
« Reply #1 on: April 13, 2022, 01:48:08 PM »
Care to share a link for the video?

jnw

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Re: Investing in China?
« Reply #2 on: April 13, 2022, 01:57:23 PM »
https://www.youtube.com/watch?v=KfgNT4tqJCw

Are these video clips real? Wow. LOL.
« Last Edit: April 13, 2022, 02:02:57 PM by JenniferW »

Scandium

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Re: Investing in China?
« Reply #3 on: April 13, 2022, 03:06:01 PM »
Not going to comment whether this is a good idea, based on a (propaganda?) youtube clip.. But:
VXUS has 8.6% China
https://www.morningstar.com/etfs/xnas/vxus/portfolio
VEMAX has 33.9% China
https://www.morningstar.com/funds/xnas/vemax/portfolio

jnw

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Re: Investing in China?
« Reply #4 on: April 13, 2022, 04:10:54 PM »
Been looking up each of the places mentioned in the above video and yeah they do in fact exist. 

Here's an artificial island they built:

https://www.youtube.com/watch?v=OlYnkwLclGk

https://www.google.com/maps/search/ocean+flower+island/@19.6638473,109.1695101,2165m/data=!3m1!1e3?hl=en

« Last Edit: April 13, 2022, 04:47:12 PM by JenniferW »

EvenSteven

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Re: Investing in China?
« Reply #5 on: April 13, 2022, 04:46:47 PM »

scottish

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Re: Investing in China?
« Reply #6 on: April 13, 2022, 05:23:08 PM »
We used to use EWH (Hong Kong index) as a proxy for China.   Things were looking good for China at the time, about 10 years ago.   Unfortunately since then, Ji has taken over the CCP leadership, and the PRC government has taken over Hong Kong and things are, well, not looking so good.    I closed out the position in January and switched  it to the international index fund we use.

Taiwan (EWT) is another option.   They have the unique risk that the PRC may try to annex them though.

I would not invest in mainland China even via an ETF.   My feeling is that there is too much corruption and government intervention for things to go well.   YMMV.   

jnw

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Re: Investing in China?
« Reply #7 on: April 13, 2022, 05:25:44 PM »
I heard the city of Dubai was built with slave labor.  They trick migrants to coming then take their passports away and then enslave them.  I'll never vacay there.

I wonder how much of this architecture built in China was from slave labor.
« Last Edit: April 13, 2022, 05:35:27 PM by JenniferW »

Radagast

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Re: Investing in China?
« Reply #8 on: April 13, 2022, 11:11:37 PM »
Comments on the buildings (I'm an engineer with training and experience in this area and spent a couple years in China)
As a general rule, Chinese buildings are shiny on the outside and rotten on the inside. It is very common for them to use too little rebar, of low quality, and poorly assembled. Often there are serious structural design flaws which are simply glossed over in construction. Vertical walls are almost always unreinforced masonry (red bricks), which is surprising because China is famous for earthquakes. Unreinforced masonry, especially dozens of stories high, is a death trap in earthquakes. Every Chinese city I have seen would be a death trap in an earthquake. In general I think the buildings will not last nearly as long structurally as you would expect based on buildings in the US, and in practice the shine becomes rust very fast, not sure if they have improved on that recently. None of these buildings, or any city in China, has water that is safe to drink out of the tap. In general I feel that China and the US have different standards for public infrastructure: US infrastructure looks terrible but works well, lasts a long time, and is cost effective. China has basically the opposite standard.

Some of the recent projects sponsored directly by the emperor are a little better, they seem to have been constructed decently and according to plan, though even those I thought had overly slender columns and too little rebar compared to what I would expect, and construction quality was at best what I would call average. In general impressive infrastructure is sponsored by the government to show its strength and prosperity. There are some truly awesome projects out there, but most of them don't seem to have gone through any kind of cost-benefit analysis. While admitting that blowing smoke out of lifted trucks and buying and sending cheap plastic trinkets to the landfill is not a better use of resources, the reason other countries don't do infrastructure like this is because it is a waste of money. And also it would be very difficult for us to procure the property. A lot of villagers (I mean really a lot) are pushed out of their homes and into planned developments by these. Having visited a couple, I can say that they feel very unnatural and somewhat dystopian. It would be like if someone built a 30 story apartment complex in the suburbs, with massive sweeping manicured roads and garden features with lights, and no shops around, and the residents could barely afford cars, public transportation was vital but sporadic, and the water wasn't safe to drink, and the building would start to fall apart in 30 years, and they couldn't get another one, and their entire life experience was living as farmers in traditional single story village houses.

I will say this: the Chinese have become really good recently at applying a great looking finish to the inside and outside of a building.  Definitely a higher standard than all but the very very best in the US. And that goes for common apartments as well as government infrastructure exhibits. However, I do think that much of it is cheaply done and will age very quickly.

Slave labor: no. Not everything, but pretty much everything, in China is made by people who want to do it and are free to leave. And they frequently leave. From what I hear Chinese labor turnover outside government jobs is very high. They have awful safety standards sure, but people are mostly happy to leave their old lives scratching the ground with hand tools for literal peanuts to get a high paying job in construction or industry. My FIL has been on a number of construction jobs as a crew boss (nothing like the buildings in the video) and no rumors of slave labor at all have reached my ears. Some pretty terrible accidents though. He had to stop work for a year or two about 5 years ago because of PTSD from one of them.

Comments on investments: I would not invest more in China than its global capitalization weight. Like Putin, the government has been on a real "everything we say and think is right, and everyone else is wrong and they don't matter" streak for the past decade. It has been becoming really obvious especially over the past few years.

Radagast

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Re: Investing in China?
« Reply #9 on: April 13, 2022, 11:14:32 PM »
I've been to a few of the places in the video and can confirm they do exist.

MustacheAndaHalf

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Re: Investing in China?
« Reply #10 on: April 14, 2022, 02:22:30 AM »
China National Offshore Oil Corporation (CNOOC) mentioned today it is unloading it's assets in the US, UK, and Canada over fears of sanctions.  There could be a risk China plans to aid Russia (it's ally), and faces sanctions for doing so.

I decided to look at how emerging market ETFs gave weight to China or Taiwan, with Hong Kong being very much part of China.  The "ex China" ETFs rank highest:

XCEM : Columbia EM Core ex-China ETF (0.16% ER), 27% Taiwan, 0% China / HK
==> note this is Columbia the company/brand, not the S. Am country.
EMXC : iShares MSCI Emerging Markets ex China ETF (0.25% ER), 22% Taiwan, 0% China / HK

It was rare to find a heavier allocation to Taiwan compared to China, but:
EWX : SPDR S&P Emerging Markets Small Cap ETF (0.65% ER), 28% Taiwan / 11% China / 3% HK

At the other end of the spectrum were 3 ETFs heavily overweighting China:
ISEM : Invesco RAFI Strategic Emerging Markets ETF (0.35% ER), 13% Taiwan / 53% China / 3% HK
EMDV : ProShares MSCI Emerging Markets Dividend Growers ETF (0.61%), 4% Taiwan / 38% China / 11% HK
OBOR : KraneShares MSCI One Belt One Road Index ETF (0.79%), 0% Taiwan / 42% China / 3% HK

I'm sure there's also ETFs dedicated to China, but I skipped those since I was looking at general emerging market ETFs.


reeshau

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Re: Investing in China?
« Reply #11 on: April 14, 2022, 05:59:56 AM »
Besides political difficulties, China will also face demographic difficulties, largely as a result of the (now ended) one child policy coming home to roost.

https://www.scmp.com/economy/economic-indicators/article/3165798/china-population-demographic-turning-point-just-around

From the article:

"'This suggests China’s total population may have reached its peak in 2021. It also indicates China’s potential growth is likely slowing faster than expected.'
Chen Wei, a professor with the Population Development Studies Centre at Renmin University, said: 'In the next 10 to 20 years, China’s natural population growth will not continue to decline, but will fluctuate around zero and see small drops, but there will not be rapid decreases.'"

While we think of China as an up-and-coming economy, its future has a lot in common with aging Western countries.  Its working age population (age 16-59) is 62.5% of the total.  The US working population, 18-64, is 59.9%.  14.2% of China's population is over 65.  For the US, it's 16%.  This brings with it familiar concerns, like the sustainability of public pension entitlements due to the number of active workers per retiree, etc.  The one thing the US has going for it vs. others in this situation, despite political efforts to kill it, is a strong attraction for immigrants.  Young immigrant labor has always been a factor boosting the US's growth, and is absent in the more extreme cases of aging population.  (e.g. Japan)  I don't see immigration to China happening in any numbers to impact its population.

I'm not suggesting that China is "done for," but the era of explosive growth will end more quickly than historical examples.  Add to this how much personal wealth has been invested in real estate (because of restrictions on stock ownership) and a lack of growth calls into question how many 2nd or 3rd apartments are really valuable.
« Last Edit: April 14, 2022, 06:04:04 AM by reeshau »

talltexan

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Re: Investing in China?
« Reply #12 on: April 14, 2022, 06:31:55 AM »
What about buying shares of $BABA as an alternative to $AMZN?

Sibley

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Re: Investing in China?
« Reply #13 on: April 14, 2022, 08:03:01 AM »
I would be quite concerned that China could become the next Russia - with sanctions, government seizure of assets, strict controls over who can buy/sell, etc. I wouldn't invest in Russia, and I'm not going to invest in China. China looks after itself and they don't seem to have an interest in helping the rest of the world. Unless it furthers their goals of course.

More concretely - there are already specific concerns and examples of the Chinese government interfering with private companies. If there's a conflict, then the non-Chinese investors are going to get shafted. Its happened. It will happen again. Therefore, any investments in China need to be made with that risk in mind.

scottish

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Re: Investing in China?
« Reply #14 on: April 14, 2022, 05:04:44 PM »
Comments on the buildings (I'm an engineer with training and experience in this area and spent a couple years in China)
As a general rule, Chinese buildings are shiny on the outside and rotten on the inside. It is very common for them to use too little rebar, of low quality, and poorly assembled. Often there are serious structural design flaws which are simply glossed over in construction. Vertical walls are almost always unreinforced masonry (red bricks), which is surprising because China is famous for earthquakes. Unreinforced masonry, especially dozens of stories high, is a death trap in earthquakes. Every Chinese city I have seen would be a death trap in an earthquake. In general I think the buildings will not last nearly as long structurally as you would expect based on buildings in the US, and in practice the shine becomes rust very fast, not sure if they have improved on that recently. None of these buildings, or any city in China, has water that is safe to drink out of the tap. In general I feel that China and the US have different standards for public infrastructure: US infrastructure looks terrible but works well, lasts a long time, and is cost effective. China has basically the opposite standard.

Some of the recent projects sponsored directly by the emperor are a little better, they seem to have been constructed decently and according to plan, though even those I thought had overly slender columns and too little rebar compared to what I would expect, and construction quality was at best what I would call average. In general impressive infrastructure is sponsored by the government to show its strength and prosperity. There are some truly awesome projects out there, but most of them don't seem to have gone through any kind of cost-benefit analysis. While admitting that blowing smoke out of lifted trucks and buying and sending cheap plastic trinkets to the landfill is not a better use of resources, the reason other countries don't do infrastructure like this is because it is a waste of money. And also it would be very difficult for us to procure the property. A lot of villagers (I mean really a lot) are pushed out of their homes and into planned developments by these. Having visited a couple, I can say that they feel very unnatural and somewhat dystopian. It would be like if someone built a 30 story apartment complex in the suburbs, with massive sweeping manicured roads and garden features with lights, and no shops around, and the residents could barely afford cars, public transportation was vital but sporadic, and the water wasn't safe to drink, and the building would start to fall apart in 30 years, and they couldn't get another one, and their entire life experience was living as farmers in traditional single story village houses.

I will say this: the Chinese have become really good recently at applying a great looking finish to the inside and outside of a building.  Definitely a higher standard than all but the very very best in the US. And that goes for common apartments as well as government infrastructure exhibits. However, I do think that much of it is cheaply done and will age very quickly.

Slave labor: no. Not everything, but pretty much everything, in China is made by people who want to do it and are free to leave. And they frequently leave. From what I hear Chinese labor turnover outside government jobs is very high. They have awful safety standards sure, but people are mostly happy to leave their old lives scratching the ground with hand tools for literal peanuts to get a high paying job in construction or industry. My FIL has been on a number of construction jobs as a crew boss (nothing like the buildings in the video) and no rumors of slave labor at all have reached my ears. Some pretty terrible accidents though. He had to stop work for a year or two about 5 years ago because of PTSD from one of them.

Comments on investments: I would not invest more in China than its global capitalization weight. Like Putin, the government has been on a real "everything we say and think is right, and everyone else is wrong and they don't matter" streak for the past decade. It has been becoming really obvious especially over the past few years.

Nicely put.   This mirrors the stories I hear from my colleagues who travel to Shenzen and Beijing.   I don't have any direct experience however.

Who do you mean when you say the emperor?  (projects sponsored directly by the emperor)


Heckler

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Re: Investing in China?
« Reply #16 on: April 14, 2022, 07:28:19 PM »
as for investing, VEE (aka VWO in freedom units) is where I get my China, and Russia unfortunately.  Only a 3% allocation of total though.  It zigs nicely when other indices zag.

https://investor.vanguard.com/etf/profile/VWO


And, as of VWO is only 0.8% Russia, although the 34% China is concerning, but I see China as far more entwined into Western exports.
« Last Edit: April 14, 2022, 07:30:25 PM by Heckler »

102

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Re: Investing in China?
« Reply #17 on: April 14, 2022, 09:15:48 PM »
I don't have any investing advice here and I don't own Chinese stocks/etf. I wanted to add that propaganda videos are pretty common on YT. Instead, here are some vloggers that I like to tune into. I think their videos are insightful. check them out if you have time:

https://www.youtube.com/c/ADVChina
https://www.youtube.com/c/ChinaUncensored

jnw

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Re: Investing in China?
« Reply #18 on: April 14, 2022, 10:06:02 PM »
I don't have any investing advice here and I don't own Chinese stocks/etf. I wanted to add that propaganda videos are pretty common on YT. Instead, here are some vloggers that I like to tune into. I think their videos are insightful. check them out if you have time:

https://www.youtube.com/c/ADVChina
https://www.youtube.com/c/ChinaUncensored

Just started watching some China Uncensored videos.  How do you know this guy isn't full of propaganda?  I watched his video on Chinese Organ harvesting from live prisoners.  Where their cause of death is for example removal of their heart for transplanting to a rich person.  It's hard to believe.  I dunno.  That's pretty messed up.

MustacheAndaHalf

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Re: Investing in China?
« Reply #19 on: April 14, 2022, 11:18:52 PM »
Without watching that video, I believe China imprisons and tortures Falun Gong members.  I've heard the rest of the world has constant shortages for organ transplants, while China doesn't.  I suspect that video connects the two, and wouldn't be the first.

A possibly relevant note about Traditional Chinese Medicine (TCM):
"TCM uses approximately 1,000 plant and 36 animal species, including the tiger, rhinoceros, black bear, musk deer, and sea horse; the tiger, rhinoceros, and sea horse are endangered."
https://www.britannica.com/explore/savingearth/chinese-medicine

If China's secret police are willing to kill a Falun Gong member... and they know that person was especially healthy and spiritual...  The next thing that happens might be a smaller leap in China than in the U.S.  I'm not saying it happened, but given the information above I can't rule it out, either.

dhc

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Re: Investing in China?
« Reply #20 on: April 15, 2022, 08:08:45 AM »
In addition to the concerns others have stated, you should be aware that you can’t actually invest in China directly. Chinese companies “listed” on stock exchanges accessible outside of China are actually shell corporations with no true ownership stake in their related Chinese companies: https://www.cnn.com/2021/08/08/investing/stocks-week-ahead/index.html

MustacheAndaHalf

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Re: Investing in China?
« Reply #21 on: April 16, 2022, 12:48:15 AM »
In addition to the concerns others have stated, you should be aware that you can’t actually invest in China directly. Chinese companies “listed” on stock exchanges accessible outside of China are actually shell corporations with no true ownership stake in their related Chinese companies: https://www.cnn.com/2021/08/08/investing/stocks-week-ahead/index.html
This is mostly accurate, although the article says "many" Chinese companies use the VIE structure, rather than all.

IBKR is unusual in allowing direct access to stock exchanges around the world.
So you could buy stock in Hong Kong, or use Hong Kong's link to Shanghai's exchange to buy Chinese stock.  I wouldn't advise it, because the tax paperwork is estimated to be 30 hours just to report on owning stock in one overseas company (so that would be 30 hours every year, and a tax attorney would be important).
https://www.interactivebrokers.com/en/index.php?f=1562&p=asia
« Last Edit: April 16, 2022, 06:57:39 PM by MustacheAndaHalf »

reeshau

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Re: Investing in China?
« Reply #22 on: April 16, 2022, 09:38:31 AM »
I wouldn't advise it, because the tax paperwork is estimated to be 30 hours just to report on owning stock in one overseas company (so that would be 30 hours every year, and a tax attorney would be important).

Are you referring to the investment possibly being a PFIC?  That's the only time I have heard 30 hours referenced.

If so, I would say:  most foreign operating companies are not PFICs.  All foreign mutual funds are.  Also, one way to avoid the PFIC question entirely is to hold the foreign security in a tax-favored account, like an IRA.  The IRS has determined they are exempt.  (The actual language is funny; I presume to thread the needle of the laws governing them.  By being in an IRA, you are declared not a shareholder.  Very doublespeak-sounding)

It's not a perfect solution, though:  holding them in this way precludes you from collecting the foreign tax credit on those holdings.

I hold CRSPR Therapeutics (A Swiss company) in my IRA's for this reason.  They have low revenue at this point, as they are still in clinical trials on their first major drugs.  But they have raised $2.5B, and have that in various investments.  They are aware of The PFIC designation, and publish their legal opinion that they are not one along with their annual report.  But they also declare as a risk that they could be determined to be one by Treasury.

MustacheAndaHalf

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Re: Investing in China?
« Reply #23 on: April 16, 2022, 06:56:15 PM »
I wouldn't advise it, because the tax paperwork is estimated to be 30 hours just to report on owning stock in one overseas company (so that would be 30 hours every year, and a tax attorney would be important).
Are you referring to the investment possibly being a PFIC?  That's the only time I have heard 30 hours referenced.

If so, I would say:  most foreign operating companies are not PFICs.  All foreign mutual funds are.  Also, one way to avoid the PFIC question entirely is to hold the foreign security in a tax-favored account, like an IRA.  The IRS has determined they are exempt.  (The actual language is funny; I presume to thread the needle of the laws governing them.  By being in an IRA, you are declared not a shareholder.  Very doublespeak-sounding)

It's not a perfect solution, though:  holding them in this way precludes you from collecting the foreign tax credit on those holdings.

I hold CRSPR Therapeutics (A Swiss company) in my IRA's for this reason.  They have low revenue at this point, as they are still in clinical trials on their first major drugs.  But they have raised $2.5B, and have that in various investments.  They are aware of The PFIC designation, and publish their legal opinion that they are not one along with their annual report.  But they also declare as a risk that they could be determined to be one by Treasury.
Oh, wow - that's very enlightening.  Yes, I originally learned about PFICs some time ago, but more recently learned about companies with products (operating companies) and holding companies (the target of PFIC).  It also makes sense IRAs wouldn't be impacted, since PFIC decides if tax should be paid on undistributed dividends.  I'll cross out my original comment.

Radagast

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Re: Investing in China?
« Reply #24 on: April 16, 2022, 11:32:40 PM »
Who do you mean when you say the emperor?  (projects sponsored directly by the emperor)
Xi Jinping :) OK emperor is a hereditary position, so maybe President-for-Life. Obviously he is not personally responsible for all of them, but construction quality is better on projects sponsored by the national government in proportion to how important the project and its sponsor are.

talltexan

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Re: Investing in China?
« Reply #25 on: April 27, 2022, 07:32:05 AM »
I did just open a position in Alibaba this week...it seemed so gosh darn low!

26 shares at about $85/share, and I sold a put with a strike price of $75.


Albatross

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Re: Investing in China?
« Reply #26 on: April 28, 2022, 04:40:24 AM »
You will all call me mad but I have US$270,000 position in Baba that's currently down US$70,000.

Sounds like an addiction story but: "It didn't start like this". I only had a US$20,000 position in it which I bought around the $190 mark 2 years ago. As it dropped, I literally caught the falling knife, many many times. Each time thinking "Whoo I'm lowering my cost average". Last time I bought in was last week at around $87. No more. My average dropped from $190 and is now at $116.

Honestly I feel foolish - because I was always a strong buy and hold broad index fund investor (and that in itself gave me confidence whenever the market dropped). But my gamble on Baba has made me insecure and constantly thinking of exit strategies. I do believe it will go back up again (as to when I'm not sure). The worst part is I've used money that I had set aside for a house deposit, for in maybe 2 years' time.

Perhaps I'm just telling this to you guys as a cautionary tale of one person's attempts to speculate, and how the fundamentals of a company is not necessarily enough to overcome geopolitical and psychological-image risks.

I am glad that the remaining part of my portfolio comprises 10% cash and 70% broad globally-diversified index funds - but I've taken a massive risk by doing what I did above.


jnw

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Re: Investing in China?
« Reply #27 on: April 28, 2022, 05:08:48 AM »
Hope ya catch a break and it bounces back up for ya.  I know what you mean .. I should only be buying VTI but I still try and beat it here and there.. I gotta at some point just buy VTI only and quick looking at the market along with my retirement balance.  Ignorance is bliss.

reeshau

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Re: Investing in China?
« Reply #28 on: April 28, 2022, 06:45:28 AM »

Honestly I feel foolish - because I was always a strong buy and hold broad index fund investor (and that in itself gave me confidence whenever the market dropped). But my gamble on Baba has made me insecure and constantly thinking of exit strategies. I do believe it will go back up again (as to when I'm not sure). The worst part is I've used money that I had set aside for a house deposit, for in maybe 2 years' time.


Thanks for sharing your story, Albatross.  Your situation sounds serious enough, though, that I did want to comment.  It is possible to invest in individual stocks successfully, but I see 3 problems with your situation:  mentally, you have 1) anchored on your buying price and 2) are considering this sunk cost when thinking of whether to exit.  The market does not care at all what you paid for it; holding this consideration only limits you.  3) you are holding money you intend to use within 2 years.  Stocks should never be invested for less than 5 years; easy enough when you have a whole career span to think about.  But as you approach a milestone, you need to be thinking less about maximizing return, and more about realizing the goal you are trying to invest for in the first place.

To be successful at stockpicking, you first need to leave emotions at the door.  If you can't, then you are giving yourself a disadvantage vs. the professionals, algorithms, and yes indexers who you are playing against.  I also think time pressures are another major disadvantage; you can see this when you have market volatility around options expiration, for example.  This is the collective action of a lot of people who have voluntarily signed up for time pressure that long-term investors don't have.

I hesitate to say this, but I did check Morningstar and Value Line, two companies that publish a stock's fair value (i.e. calculated business worth) vs. price targets (expected market price in 12 months)  They say BABA is worth holding--I won't tempt you with numbers.

More concerning is the political situation between China and the US.  BABA is still at risk for de-listing in the US, which would make your current losses look small.  The action centers on whether China will allow the SEC access to company audit records.  The threat seems to have lowered a little bit (from almost certain) but who knows what will happen?  The key thing is, this is a political pissing match between China and the US, and has nothing to do with the company's performance--it's out of their control, and your control.

To me, given you have a goal as important as a house purchase due in two years, this is screaming for you to get out now.  My advice is to take your lumps, know that you will have some capital losses to either offset gains or income (at $3k per year) into the future, and move on.

Albatross

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Re: Investing in China?
« Reply #29 on: April 28, 2022, 07:55:05 AM »
Thanks reeshau - I do recognise and appreciate those 3 points and honestly kept telling myself, it'll turn round any moment, don't worry.

I've only used a part of the money we saved for house deposit to speculate, not all, so it's not super desparate and time-sensitive, so whilst I might offload some Baba to reduce risk, I simply don't think I could entirely crystallise a loss. I know this is the wrong way of thinking about it - but I just can't bring myself to do it.

talltexan

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Re: Investing in China?
« Reply #30 on: April 28, 2022, 08:57:27 AM »
Do you have any expertise with covered calls? Might be a way to get some cash flow on the position.

jnw

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Re: Investing in China?
« Reply #31 on: April 28, 2022, 09:30:42 PM »
Thanks reeshau - I do recognise and appreciate those 3 points and honestly kept telling myself, it'll turn round any moment, don't worry.

I've only used a part of the money we saved for house deposit to speculate, not all, so it's not super desparate and time-sensitive, so whilst I might offload some Baba to reduce risk, I simply don't think I could entirely crystallise a loss. I know this is the wrong way of thinking about it - but I just can't bring myself to do it.

So if the stock gets to $116 are you going to reduce your investment in it down to like $20k again?   Or perhaps a series of sell limit orders as it approaches $116 and past it?  Just curious what your strategy is.  I see it's up the past few days, hope it can get up near your $116 soon.
« Last Edit: April 28, 2022, 09:33:16 PM by JenniferW »

Albatross

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Re: Investing in China?
« Reply #32 on: April 29, 2022, 01:00:45 AM »

So if the stock gets to $116 are you going to reduce your investment in it down to like $20k again?   Or perhaps a series of sell limit orders as it approaches $116 and past it?  Just curious what your strategy is.  I see it's up the past few days, hope it can get up near your $116 soon.

I think once it hits $116, I will sell 50% to reduce risk exposure. Once (and if) the remaining 50% hits 5% over $116 (i.e. $122), I will set a stop loss order at $116 so that worse case scenario I break even on the whole amount if it dips back down. But if it doesn't dip back down, then I will let it grow, and probably incrementally increase the stop loss order price for every 5% it goes up. My original exit was a profit of $25,000, and so I'll exit Baba in any event if it hits $138.

Alternatively, I'm still open to just setting a stop loss at $116 on the whole amount once it reaches around $120, and then chase the price increases with incremental increases to the stop loss price if it keeps going up.

Baba has now crossed back over into the $100 range as of today in Hong Kong (up approx 13%). Who knows though - incredibly volatile.

Albatross

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Re: Investing in China?
« Reply #33 on: April 29, 2022, 01:02:26 AM »
Do you have any expertise with covered calls? Might be a way to get some cash flow on the position.

I don't. Had to look it up and probably not something I can pay enough attention to, to make it work. Thanks though!

reeshau

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Re: Investing in China?
« Reply #34 on: April 29, 2022, 06:03:36 AM »

Alternatively, I'm still open to just setting a stop loss at $116 on the whole amount once it reaches around $120, and then chase the price increases with incremental increases to the stop loss price if it keeps going up.

Baba has now crossed back over into the $100 range as of today in Hong Kong (up approx 13%). Who knows though - incredibly volatile.

Understand, though, that a stop loss order does not guarantee that you get the trade at the amount you set.  It sets a *market order* once that price is breached.  And since it is set at a price less than current, it happens when the momentum is down.  So, with the volatility of BABA, your stop loss at $116 may come back much less than $116.

jnw

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Re: Investing in China?
« Reply #35 on: April 29, 2022, 06:38:36 AM »
Baba has now crossed back over into the $100 range as of today in Hong Kong (up approx 13%). Who knows though - incredibly volatile.

Yeah, wow I was just gonna tell you this. I have my eyes on it.  Gettin' close :)  Wish you the best.

Albatross

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Re: Investing in China?
« Reply #36 on: April 29, 2022, 06:49:54 AM »

Understand, though, that a stop loss order does not guarantee that you get the trade at the amount you set.  It sets a *market order* once that price is breached.  And since it is set at a price less than current, it happens when the momentum is down.  So, with the volatility of BABA, your stop loss at $116 may come back much less than $116.

Thanks yes - I didn't think it would be too far off $116 but I may be wrong? I was also looking at stop limit orders (so e.g. stop at $117 and limit at $116), but I didn't want it to totally just not sell if it dropped below my $116 before it executed the order.

jnw

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Re: Investing in China?
« Reply #37 on: April 29, 2022, 07:10:14 AM »
I think once it hits $116, I will sell 50% to reduce risk exposure.

Is it best to have it 100% planned out because in the heat of the moment emotions set in?  If you like, "Sell Limit Order(s)" can automatically execute your plan without emotion; even in your sleep perhaps in pre or post market hours, if you set your limit orders to allow execution during extended hours. Also sometimes stocks can surge the first few minutes in the morning after the bell and they can drop really fast, so it's sometimes hard to enter in the order with shaking hands.. it's happened to me lol -- limit orders could possibly solve this problem as well.

Just an idea, not trying to influence you at all.   But that perhaps if reducing your exposure by 50% at $116 is really what you want to do, then you can easily implement something that will execute your plan automatically, without emotion.
« Last Edit: April 29, 2022, 07:13:48 AM by JenniferW »

reeshau

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Re: Investing in China?
« Reply #38 on: April 29, 2022, 08:17:50 AM »

Understand, though, that a stop loss order does not guarantee that you get the trade at the amount you set.  It sets a *market order* once that price is breached.  And since it is set at a price less than current, it happens when the momentum is down.  So, with the volatility of BABA, your stop loss at $116 may come back much less than $116.

Thanks yes - I didn't think it would be too far off $116 but I may be wrong? I was also looking at stop limit orders (so e.g. stop at $117 and limit at $116), but I didn't want it to totally just not sell if it dropped below my $116 before it executed the order.

The danger is if it gaps down, just like it gapped up today.  (because China said it was backing off tech company regulations--adding more)  If it crosses in the course of a day, then yes it will probably be close.

In a gap situation, then you have both sides of the coin:  a stop limit may leave you holding the stock, and a stop will realize the gap.

In the course of things, though, you might think it would still be more than it is today.  Rip the bandaid off today, or set up something automatic.  You might not maximize what you could get, but the mental pain of worrying about it will be relieved.  Be content that you got something...enough...out of it, but most of all you can relax and get on with your plans.

Albatross

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Re: Investing in China?
« Reply #39 on: April 30, 2022, 11:12:31 PM »

Is it best to have it 100% planned out because in the heat of the moment emotions set in?  If you like, "Sell Limit Order(s)" can automatically execute your plan without emotion; even in your sleep perhaps in pre or post market hours, if you set your limit orders to allow execution during extended hours. Also sometimes stocks can surge the first few minutes in the morning after the bell and they can drop really fast, so it's sometimes hard to enter in the order with shaking hands.. it's happened to me lol -- limit orders could possibly solve this problem as well.

You're absolutely right. Thank you. I have decided that:
1. I will wait until it hits $122 and then set a stop loss at $117, which if it gaps down, will hopefully not be too far off my break even of $116. I will then let it grow if it wants to (and if so increase the stop loss to stay in line with 5% below the current price). If it at any time triggers the stop loss then so be it.
2. If it grows beyond my initial profit point of $25,000 (i.e. price of $138), I will only increase the stop loss at 10% under any further price increases, to further avoid volitility triggering the stop loss, and I will in any event be very happy at that point.
3. Finally, I will sell at whatever price it is above $116 in April 2023 (approx. a year from now) as we have emigration plans and I want to lock in my cash position to reset CGT position in new country. If it is still languishing below $116 by next April 2023, I will hold until it reaches $116 and sell (likely after I have already emigrated, and could be years from now).

Albatross

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Re: Investing in China?
« Reply #40 on: April 30, 2022, 11:15:19 PM »

In the course of things, though, you might think it would still be more than it is today.  Rip the bandaid off today, or set up something automatic.  You might not maximize what you could get, but the mental pain of worrying about it will be relieved.  Be content that you got something...enough...out of it, but most of all you can relax and get on with your plans.

Thanks again @reeshau. I replied to @JenniferW regarding my gameplan. I am fairly confident it will peak its head above 122 in the next year or so even if for a day, and will stick to that plan.

MustacheAndaHalf

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Re: Investing in China?
« Reply #41 on: May 01, 2022, 02:33:14 AM »
Sounds like an addiction story but: "It didn't start like this". I only had a US$20,000 position in it which I bought around the $190 mark 2 years ago. As it dropped, I literally caught the falling knife, many many times. Each time thinking "Whoo I'm lowering my cost average". Last time I bought in was last week at around $87. No more. My average dropped from $190 and is now at $116.

Honestly I feel foolish - because I was always a strong buy and hold broad index fund investor (and that in itself gave me confidence whenever the market dropped). But my gamble on Baba has made me insecure and constantly thinking of exit strategies. I do believe it will go back up again (as to when I'm not sure). The worst part is I've used money that I had set aside for a house deposit, for in maybe 2 years' time.
A relevant tidbit, with a slight tangent to explain the source.  Josh Brown (CNBC contributor during "Halftime Report") mentioned that Buffet & Munger are braver than people give them credit.  His specific example was recent, that Charlie Munger had bought Alibaba shares on margin.  You might want to fact check that, which could give you confidence to hold a bit longer.

But if you don't mind, I'd like to criticise myself for doing something similar as you back in Nov-Dec.  I joined Motley Fool so they could do the stock selection and research, and I could just do a minimal amount of work to pick stocks.  The problem wasn't stock picking, but how I invested.

I tried buying a full allocation, and if that fell, buying back up to the original allocation.  The overall market doesn't crash to zero, which makes dollar cost averaging work.  But stocks can no nowhere or crash to zero, so dollar cost averaging will not necessarily work... I think "loser cost averaging" is a better description.  And that underweights the stocks that do well!  No more is bought, except in stocks that fall.

I sold in Jan, and bought back in Feb, side stepping more losses.  But I made a similar mistake to the above - I bought each stock a new, full allocation.  This meant I lost money in Nov-Jan, then added money to lose in Feb-Mar.  So while I lost less than the stocks did Nov-Mar, I lost more than I should by repeatedly giving full allocations to these stocks.

To take a movie tangent, the godfather (part III) says "Just when I thought I was out, they pull me back in!"  Which is how I feel about active investing.  I tried to get out in Nov-Dec with buy & hold, only to watch the Fed make mistakes and the market believe them.  I sold all my individual stocks in March, and switched to a bearishly positioned portfolio at the start of April.

So for me personally, I'm not investing in OXY (recent Berkshire purchase) or BABA (Munger's stock pick), but you're not in bad company if you do.  But I would urge you to see the lesson we both had in throwing good money after bad, in "loser cost averaging" as I called it above.  Learn that lesson and stop adding to your BABA position.

Albatross

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Re: Investing in China?
« Reply #42 on: May 03, 2022, 08:59:52 PM »

So for me personally, I'm not investing in OXY (recent Berkshire purchase) or BABA (Munger's stock pick), but you're not in bad company if you do.  But I would urge you to see the lesson we both had in throwing good money after bad, in "loser cost averaging" as I called it above.  Learn that lesson and stop adding to your BABA position.

Thanks @MustacheAndaHalf. Yes I am aware of the Charlie Munger position - also aware that his Daily Journal position halved in the last quarter. Some speculation that they sold at a loss to match a gain in another investment for CGT purposes - but who knows!

I hear you and won't be adding any more to Baba. All new paycheques have been to recover and increase my cash position recently, to bring it in line with what I had previously envisaged and to lessen the 'blow' to part of the money I set aside for a house deposit.

It's been hovering around $100 and no matter what I do, it really is quite hard not to check the price daily! I've already set an alert for $117 price point and hidden my trading app away somewhere - but I can't help myself from checking.

I think ultimately I'm disappointed in myself for not sticking to my mid and long-term portfolio manifesto by taking unnecessary risks and definitely a lesson learnt in feeling a bit 'greedy' and assuming the market can return to rational levels fairly quickly.

expatartist

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Re: Investing in China?
« Reply #43 on: May 04, 2022, 12:27:14 AM »
Comments on the buildings (I'm an engineer with training and experience in this area and spent a couple years in China)
As a general rule, Chinese buildings are shiny on the outside and rotten on the inside. It is very common for them to use too little rebar, of low quality, and poorly assembled...

As a former Beijing resident I agree 100%. The flat my work provided for me was worth a million US, easy, at most a decade old, but was falling apart.

I wouldn't invest too heavily in China, though my job is currently tied to it - shadow banking is real, here's a basic introduction:
https://iems.ust.hk/publications/thought-leadership-briefs/tsai-rise-of-shadow-banking-in-chin
And its commitment to zero covid is hurting the economy which will have ripple effects for years to come.

shureShote

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Re: Investing in China?
« Reply #44 on: May 04, 2022, 06:17:31 AM »
There are about 50 new homes being built right this minute in my little subdivision here in lovely middle of nowhere midwestern city. I don't think China has the market cornered on crappy buildings. Our house was built in 2015 and it is shiny on the outside and rotten (relative to the price at least) underneath. I know it is not the same by a long shot, but it's not like we are exactly building things that will last either. Perhaps for different reasons, perhaps for similar.

I have two current projects with a Chinese supplier (automotive components) and have worked with China on and off since about 2004, and my experience has been nothing but positive. Thankfully far far away from the government from my side.

While I would not specifically target a China only investment, I am fine with all the Chinese companies I hold chunks of in my passive portfolio. I don't do any active investing or stock picking, I let the market figure that out for me. At least I do with new money, I still have some taxable investments that would need at least another 50% drop in equities to get out without a large tax bill that are more active investments.

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Re: Investing in China?
« Reply #45 on: May 04, 2022, 07:08:36 AM »
Here's a great write-up about how Didi / China ripped off American investors:

https://www.cnn.com/2022/05/03/investing/didi-ipo-us-sec-probe-intl-hnk/index.html

TL;DR -

1) Didi IPO's in the US on 6/30/21 at $4.4B.
2) The Chinese government, mad they didn't IPO in China, slaps a bunch of restrictions and investigations on Didi.
3) Shares drop 86%
4) The company announces they will delist in the US and shift to the Hong Kong exchange.

These kind of things just keep happening, which has made a growing number of Americans think of the world's largest economy as uninvestable.

reeshau

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Re: Investing in China?
« Reply #46 on: May 04, 2022, 07:16:18 AM »
@Albatross , I'm sure events like this aren't helping your stomach settle.  Think of it as a good reason why you should ignore the daily variation.

https://fortune.com/2022/05/03/alibaba-shares-founder-jack-ma-cctv-report-arrest/

TL:DR:  Here's the headline of the article:

"Alibaba investors are so skittish they dumped $26 billion because police arrested someone named Ma. It wasn’t Jack"

talltexan

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Re: Investing in China?
« Reply #47 on: May 04, 2022, 08:31:25 AM »
I see the headline, but is the pullback in the stock so large relative to other recent movements?

(disclose that I am long $BABA)

MustacheAndaHalf

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Re: Investing in China?
« Reply #48 on: May 04, 2022, 09:01:56 AM »
So for me personally, I'm not investing in OXY (recent Berkshire purchase) or BABA (Munger's stock pick), but you're not in bad company if you do.  But I would urge you to see the lesson we both had in throwing good money after bad, in "loser cost averaging" as I called it above.  Learn that lesson and stop adding to your BABA position.
It's been hovering around $100 and no matter what I do, it really is quite hard not to check the price daily! I've already set an alert for $117 price point and hidden my trading app away somewhere - but I can't help myself from checking.
If you can reduce the importance or frequency of checking, that might help.  In case you prefer videos or reading, here's both:

"Warren Buffett~ Stocks do not know who owns it"
https://www.youtube.com/watch?v=ss0cHrqFr3Q

"Anchoring is a cognitive bias in which the use of an arbitrary benchmark such as a purchase price or sticker price carries a disproportionately high weight in one's decision-making process."
https://www.investopedia.com/terms/a/anchoring.asp

reeshau

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Re: Investing in China?
« Reply #49 on: May 04, 2022, 02:10:54 PM »
I see the headline, but is the pullback in the stock so large relative to other recent movements?

(disclose that I am long $BABA)

The source that pointed me to it said there was a 3% drop that day.  So, in terms of the year, no, but It's just a daily headache made from an absolutely irrelevant fact.

 

Wow, a phone plan for fifteen bucks!