How cheap are China stocks?
China stocks had a bad 2021. Just as investors thought that things should get better in 2022, China stock market plunged even more. The China stock market keeps getting cheaper, especially the tech ones. Let's look at some statistics to see how cheap China stocks are.
The $Hang Seng TECH Index(800700.HK$ Hang Seng Tech index was launched on 27 Jul 2020 and has dropped 50% since that day. Bloomberg reported that the $KraneShares CSI China Internet ETF(KWEB.US$ KraneShares CSI China Internet ETF has wiped out all the gains in the 9 years since its inception.
The total market cap of the component stocks in the Hang Seng Tech Index is US$1,067 billion. Amazon has a market cap of US$1,538 billion. This means that Amazon is larger than 30 stocks that include Alibaba, Tencent, Xiaomi, Meituan and JD.com, with another $471 billion to spare to match the combined market cap of ICBC, Bank of China and BYD.
Apple has a market cap of US$2,600 billion and it is more than the market cap of Amazon plus all the Hang Seng Tech Index components.
$Alibaba(BABA.US$ Alibaba has dropped 50% twice. Alibaba (BABA) hit a high of $319.32 on 27 Oct 2020. It reached half of its value of $159.66 on 20 Aug 2021. That was 297 days apart. It dropped another 50%, 206 days later, to $79.83.
$BABA-SW(09988.HK$ Alibaba's offer price in HK listing was HK$176 in 2019. The share price now is at HK$71.25, or 60% below its offer price. As for the US listing, the share price of $76.76 is just 11% above the IPO price of $68. Almost 8 years have passed and that returns about 1.5% CAGR, worse than CPF OA interest.
$TENCENT(00700.HK$ Tencent is trading below HK$300, that is worse than the Covid low of HK$323.40. The last time it was trading at HK$298 was in 4 Jan 2019. So Tencent is at its 3-year low despite growing its EPS at a CAGR of 30.4% in the past 3 years.
Tencent PE ratio is at 12x. This looks like a value stock's PE ratio, not befitting a big tech growth stock. Tencent average PE ratio in the past 10 years is 39x.
Even if you have seized the opportunity to buy Ping An Insurance at HK$64.50, the lowest point during the Covid crisis, you will still lose money today as it is trading 28% lower at HK$46.35.
It is rare to see tech stocks trade below their book value. They usually trade at many multiples of their book. But here are some China tech stocks with PB ratio below 1: Tencent Music, Lufax, OneConnect, Agora, Huya, Douyu, Joyy, Vipshop and Baozun.
Of course, what is cheap can get cheaper. It definitely doesn't feel good if you are holding China stocks.
If you have regretted buying these China stocks and have given up hope on China, you can look for better alternatives - sell your China stocks and switch, no matter how much losses you have incurred. You don't need to make back the money from the same stocks you lose it.
If you are still bullish about China's future and want to hold the stocks, stop watching the markets. Be patient and wait till 2030, whereby China is expected to overtake the US to become the biggest economy.
If you have spare capital and want to buy more China stocks, you can buy those long-term holdings when you think the price is cheap enough. Or you can apply some technical analysis to determine a rebound before buying.
If you have regular capital coming in to buy China stocks, you can keep buying to average down. But you need strong psychology to keep adding.
Tough times will happen time to time in the markets but they don't last forever.
The $Hang Seng TECH Index(800700.HK$ Hang Seng Tech index was launched on 27 Jul 2020 and has dropped 50% since that day. Bloomberg reported that the $KraneShares CSI China Internet ETF(KWEB.US$ KraneShares CSI China Internet ETF has wiped out all the gains in the 9 years since its inception.
The total market cap of the component stocks in the Hang Seng Tech Index is US$1,067 billion. Amazon has a market cap of US$1,538 billion. This means that Amazon is larger than 30 stocks that include Alibaba, Tencent, Xiaomi, Meituan and JD.com, with another $471 billion to spare to match the combined market cap of ICBC, Bank of China and BYD.
Apple has a market cap of US$2,600 billion and it is more than the market cap of Amazon plus all the Hang Seng Tech Index components.
$Alibaba(BABA.US$ Alibaba has dropped 50% twice. Alibaba (BABA) hit a high of $319.32 on 27 Oct 2020. It reached half of its value of $159.66 on 20 Aug 2021. That was 297 days apart. It dropped another 50%, 206 days later, to $79.83.
$BABA-SW(09988.HK$ Alibaba's offer price in HK listing was HK$176 in 2019. The share price now is at HK$71.25, or 60% below its offer price. As for the US listing, the share price of $76.76 is just 11% above the IPO price of $68. Almost 8 years have passed and that returns about 1.5% CAGR, worse than CPF OA interest.
$TENCENT(00700.HK$ Tencent is trading below HK$300, that is worse than the Covid low of HK$323.40. The last time it was trading at HK$298 was in 4 Jan 2019. So Tencent is at its 3-year low despite growing its EPS at a CAGR of 30.4% in the past 3 years.
Tencent PE ratio is at 12x. This looks like a value stock's PE ratio, not befitting a big tech growth stock. Tencent average PE ratio in the past 10 years is 39x.
Even if you have seized the opportunity to buy Ping An Insurance at HK$64.50, the lowest point during the Covid crisis, you will still lose money today as it is trading 28% lower at HK$46.35.
It is rare to see tech stocks trade below their book value. They usually trade at many multiples of their book. But here are some China tech stocks with PB ratio below 1: Tencent Music, Lufax, OneConnect, Agora, Huya, Douyu, Joyy, Vipshop and Baozun.
Of course, what is cheap can get cheaper. It definitely doesn't feel good if you are holding China stocks.
If you have regretted buying these China stocks and have given up hope on China, you can look for better alternatives - sell your China stocks and switch, no matter how much losses you have incurred. You don't need to make back the money from the same stocks you lose it.
If you are still bullish about China's future and want to hold the stocks, stop watching the markets. Be patient and wait till 2030, whereby China is expected to overtake the US to become the biggest economy.
If you have spare capital and want to buy more China stocks, you can buy those long-term holdings when you think the price is cheap enough. Or you can apply some technical analysis to determine a rebound before buying.
If you have regular capital coming in to buy China stocks, you can keep buying to average down. But you need strong psychology to keep adding.
Tough times will happen time to time in the markets but they don't last forever.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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John Shan8 : Like it or not China’s economy will continue to grow! These short term pain will pass!
YC Xiao : I have bought more China blue chip stocks over the last few days and will be laughing to the bank in couple of years.
micjenn : like i said before, tough time dun lasts, only tough guys do
!