JICPT| Tighten regulation triggered big Chinese stock sell-off
Actualizado
What a bloody day for Chinese mainland stock market and HK stock market. The tech stocks, such as Tencent and BABA tumbled by more than 7%. Even value investor favored blue chip-Kweichow Moutai, dropped by over 5% and touched the level below CNY1800 per share for the first time this year.
Kweichow Moutai
How did it start? It was all related to recent crack down on private education industry. Soft copy of the policies targeting the education sector were circulated on line on the Friday day afternoon. I also got a screen shot of the partial soft copy in Chinese. It said the educational training institutions will be banned from raising money through listings. That trigger the first wave of sell-off last Friday. Today is actually the second wave, that impacted the related companies listed in HK market. In addition, investors are concerned about how tighter the restrictions might go, even for Chinese big techs. Meituan, Tencent and BABA also got hit.
From the selling orders, I suspected a bulk of those were from institutions. In addition, over CNH 10B fund outflowed via the China-HK connect scheme. I guess the regulations messed up the valuation, and uncertainty triggered the sell-off. Institutions will see how it goes in the future before coming back again. So I'm bearish for Chinese tech stocks the near term. For the education ones, I recommend immediate sell or sell the rebound. The Fundamental part of private education has changed. The related stocks are likely to go further down, say 30% to 40%, before new business models are recognized by the market.
I personally, prefer Chinese alcohol stocks, e.g. Kweichow Moutai to Chinese tech companies. The unregulated golden days has passed.
Today, I bought some Chinese alcohol ETF. The valuation of the sector become attractive. It reached a reasonable zone in my view. This is investor, not trading. I got enough cash to buy(dollar averaging cost) and are prepare for another 20% drop. I will buy the dip.
I also linked my published idea regarding Tencent and HSI below. Both are coming toward my buying zone. However, the fear may result in overreaction under the current circumstance. To reduce the risk, you can wait for bullish pattern, bullish engulfing or breakout the downtrend line on the daily for better entries.
Hopefully, it helps.
Kweichow Moutai
How did it start? It was all related to recent crack down on private education industry. Soft copy of the policies targeting the education sector were circulated on line on the Friday day afternoon. I also got a screen shot of the partial soft copy in Chinese. It said the educational training institutions will be banned from raising money through listings. That trigger the first wave of sell-off last Friday. Today is actually the second wave, that impacted the related companies listed in HK market. In addition, investors are concerned about how tighter the restrictions might go, even for Chinese big techs. Meituan, Tencent and BABA also got hit.
From the selling orders, I suspected a bulk of those were from institutions. In addition, over CNH 10B fund outflowed via the China-HK connect scheme. I guess the regulations messed up the valuation, and uncertainty triggered the sell-off. Institutions will see how it goes in the future before coming back again. So I'm bearish for Chinese tech stocks the near term. For the education ones, I recommend immediate sell or sell the rebound. The Fundamental part of private education has changed. The related stocks are likely to go further down, say 30% to 40%, before new business models are recognized by the market.
I personally, prefer Chinese alcohol stocks, e.g. Kweichow Moutai to Chinese tech companies. The unregulated golden days has passed.
Today, I bought some Chinese alcohol ETF. The valuation of the sector become attractive. It reached a reasonable zone in my view. This is investor, not trading. I got enough cash to buy(dollar averaging cost) and are prepare for another 20% drop. I will buy the dip.
I also linked my published idea regarding Tencent and HSI below. Both are coming toward my buying zone. However, the fear may result in overreaction under the current circumstance. To reduce the risk, you can wait for bullish pattern, bullish engulfing or breakout the downtrend line on the daily for better entries.
Hopefully, it helps.
Nota
In the different context, the original expected rebound zone I drew many days ago, got violated as expected. I can feel investors are scared and becoming very bearish. That's the first sign of possible rebound. 
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