I know the bulls would say: 'It's just going to be education stocks, and then it was gaming crackdown, short seller Dan David told Yahoo Finance Live video above In the last few months, the Chinese government under President Xi Jinping had started tightening regulatory regulations across various sectors such as gaming — both in terms of casinos and kids playing video games — in addition to Big Tech in the country and even celebrity culture.
Wolfpack Research Founder and CIO added: We are not even in the beginning stages of the crackdown. China are going back to a policy of total control. Part of Xi s focus is addressing the wealth inequality in China: There are 626 billionaires in China as of last year, as compared to 724 in the U.S. according to Forbes In contrast, Chinese Primer Li Keqiang said that in 2020's China press conference, 600 million people amounted to barely 1,000 Yuan — roughly $155 — for monthly income.
State messaging indicates that the Chinese Communist Party CCP is pursuing the concept of common prosperity to address the wealth gap.
We will adhere to the commonstay status of the people and the direction of most modern prosperity, and always practice development for the people, development by the people, and sharing the fruits of development by the people with the people, the CCP's most recent five-year plan stated. We will protect the people s fundamental interests, inspire the enthusiasm, initiative & creativity of all the people, promote the well-being of the people and continuously realize people's aspirations for the good life According to David, these developments made it very dangerous for U.S. investors to hold Chinese stocks because of their current technological advancements. He also stressed that with big mutual funds like BlackRock, Vanguard and Fidelity exposed to Chinese companies, that would put investors at great risk. 'They have missed out on what is going in China'.
Some experts and investors still remain optimistic about the outlook for foreign companies in China — at least for the time being.
Cowen Research's Oliver Chen told Yahoo Finance Live that he was bullish on luxury goods in China as well as in the U.S.
Consumption has changed in China, where it is more inside China than traveling, said Chen. The real estate market is very robust, as wealthy people have benefitted from stock market appreciation, investing in wealth. Coach added that he saw a lot of momentum for companies that are targeted to the middle-class, such as Chen and Tapestry.
Chen also acknowledged possible headwinds for ultra-rich companies in China, particularly for the brands catering to foreign markets. Even though Louis Vuitton has an outstanding presence in China, Xi s desire to achieve a common prosperity and equalitarian nature in China could present a big risk to the luxury sector, said Chen.
CIO Ray Dalio of Bridgewater Inc. argued for investors to invest in China despite the crackdowns.
I have found that most Western observers are western observers. interpret moves like these two recent ones as the Communist Party leaders showing their true anti-capitalist stripes even though the trend over the last 40 years has been clearly in developing a market economy with capital markets, with entrepreneurs and capitalists becoming rich, Dalio wrote in a LinkedIn post on July 30, referring to the crackdown in the ride-hailing and education sectors.
As a result, they ve missed out on what s going on in China and likely will continue to miss out, the billionaire hedge fund manager added. I encourage you to not misinterpret these sorts of moves as reversals of the trends that have existed for several decades and let that scare you away. At the same time, no one outside of the CCP really know what comes next.
While global regulators are primarily focused on just four Big Tech companies, the Chinese government is targeting dozens and has the centralized power to act quicker and more aggressively than the US, DataTrek s Jessica Rabe wrote in a recent note. This nuance makes it tougher for investors to navigate the current environment, particularly as Chinese regulators remain tightlipped about everything they plan. She can be reached at aarthiyahoofinance.com. Follow her on Twitter aarthiswami.
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