Relations are Souring Between the World’s Largest Economies
After a Chinese crackdown left U.S. investors holding the bag, new measures are being taken to protect them – and the results could have huge ramifications.
For most of this year, some of China’s largest corporations have come under fire from a somewhat unexpected source – their own government.
And it’s created a major headache for investors.
At this point, you’ve likely seen multiple stories over the last several months about Chinese stocks that are listed on U.S. exchanges getting crushed by the Chinese government’s crackdown on what it sees as vulnerabilities in data protection.
Some of China’s biggest stocks have suffered huge losses as a result, like Alibaba Group Holding Limited (BABA) dropping more than 40% since late February.
Many of the market’s largest institutions have offloaded significant portions of their holdings in Chinese companies, leading to more than a 46% drop on the Nasdaq Golden Dragon China Index – which tracks 98 of China’s biggest firms listed in the U.S.
While I often look at such massive declines as potential profit opportunities, it doesn’t look like things are getting better any time soon.
In fact, they’re getting worse.
Where’s the money?
The U.S. and China have had a very complex and contentious relationship for years, especially when it comes to the stock market. But the situation has grown especially tense this year.
After watching so many investors take gigantic losses in recent months on Chinese companies listed on U.S. exchanges, the Securities and Exchange Commission (SEC) is stepping in to help protect investors.
Last month, the SEC suspended new IPOs for Chinese companies unless they detail the increased risks that investors face in the current climate.
But now, the SEC is taking those measures a step further.
In an interview on Tuesday, SEC Chair Gary Gensler vowed to de-list any Chinese companies that do not submit to inspections of their financial audits by the three-year deadline the SEC previously set.
Those de-listings could come as soon as 2024 based on the current timeline.
This latest escalation in the strife between the U.S. and China has many investors worried their shares being de-listed – which would be a catastrophic outcome for anyone holding the stock.
Here’s how I see this playing out.
How do I get some?
In the end, I believe that the biggest Chinese companies like Alibaba and Tencent Holdings Limited (TCEHY) will avoid being de-listed.
There’s simply too much money at stake from U.S. investors to resist the SEC’s demands for greater oversight.
Unless, of course, the Chinese government steps in to actively prevent them from doing so.
I’m still very wary over buying any Chinese stock right now. I think the rhetoric between the two sides will continue to ramp up in the coming months.
But eventually, the selling pressure that Chinese stocks have experienced is going to create a ton of buying opportunities on discounted stocks – as soon as things become more amicable between the U.S. and China.
For now, stay away from investments in smaller Chinese companies, and if looking into an investment, research if they’ve been willing to provide warnings on their statements, submit to financial audits, and comply with any other SEC demands before buying.
And when the time is right, I’ll be ready with my S.C.A.N. system and live trading rooms to let you know exactly how to play the comeback in Chinese stocks.
Your chance to see a live trading room in action
Nearly every day of the week, members of my 1450 Club and Project 303 trading services join me in live trading rooms to get up-to-the-minute market intel and trade recommendations.
But if you haven’t yet made the leap to join one of my services that offers a live trading room, today you have an opportunity to experience it, absolutely free.
Today at 11:30 a.m. ET, I’ll be joining Money Morning Live to give viewers an exclusive look at the latest market movements.
During today’s appearance, I’ll be giving attendees up-to-the-minute intel on the best profit opportunities in the market.
You’ll also have the chance to ask me any questions you have in the chat.
All you have to do is click here to catch my appearance on Money Morning Live.
In the Spotlight: Sports gambling stocks are already on the board…
A few weeks ago, I highlighted a big acquisition by Penn National Gaming, Inc. (PENN) and the big profits it yielded.
This is one of several sports gambling stocks that I’m incredibly bullish on.
With the kickoff of both college and professional football mere days away, investors continue to pile into sports gambling stocks.
And I sure hope you took my advice on PENN, because since that time, the stock has already climbed as high as 13.4%.
Investor sentiment continues to be high on a number of sports gambling stocks as more states are now allowing it than ever before.
I’m expecting some huge Q4 results for both Penn National and DraftKings Inc. (DKNG) on record sports gambling revenues this season.
I’ll continue to monitor this industry, and we’ll check back periodically for updates. Stay tuned.