Chinese Stocks

The Chinese stocks are down over 50% to 80%. Baba, JD, Tenecent, Meituan, GOTU, DIDI and a host of others.
Is it time to buy?

Hi, mramesh.

I cannot give you individual or specific investment advice. The thing about China (there are many things about China) is that you have to accept that your invested companies are not on their own. Big Brother, the government, is always watching. If you step out of line, the hammer can fall. And then there’s the whole human rights thing, and IP theft thing, and abusive labor practices thing. So basically, you have to be willing to trade a lot of negatives for the opportunity of companies that have the largest addressable consumer market. Oh, and if the company does not conform to general accounting and reporting standards, the SEC could move to delist it from US exchanges.

Once you get past the whole “China” thing, the next question is whether you have high conviction in the long term (3-5 years or longer) business growth potential of the individual company, recognizing that at any moment the government could interfere with management’s best laid plans. If you believe in the company and can tolerate the risk that investing in China represents, there can be some great opportunities.

Who notes in terms of whether it is time to buy, his general rule is that if you’ve already made the decision to invest and added a company to your Buy Watch List, then the question is whether the market price is discounted enough to where you are interested or do you want to see if the market goes down further, understanding that market timing is not Foolish and you may already have hit bottom, or may have further to drop…

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