Intrinsic Value System

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Intrinsic Value System
Geopolitics & Fundamental China Investment Strategy & Insights: China Internet Sector Revisits a Bear Market. What's next?

Geopolitics & Fundamental China Investment Strategy & Insights: China Internet Sector Revisits a Bear Market. What's next?

China Investment Strategy: Premium Note to Members (With thoughtful and comprehensive preview)

Larry Cheung, CFA
Mar 09, 2023
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Intrinsic Value System
Intrinsic Value System
Geopolitics & Fundamental China Investment Strategy & Insights: China Internet Sector Revisits a Bear Market. What's next?
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China at War – From Ancient times to the Modern Day | Welcome To China
Sun Tzu: The wise warrior avoids the battle. How this famous saying can help us navigate the China selloff.

Members,

The Bear Market in China has returned, and I would like to provide a strategy update.

There are several ways you can track China:

  • KWEB Internet ETF (most prominent ETF by AUM size)

  • FXI Large Cap China Growth

  • CQQQ Investco China Tech ETF

  • MCHI China ETF

Since the mid-January euphoria phase where investors rushed into China on the promise of the reopening trade, most of these ETFs are experiencing a swift, violent 20% retracement. It was at those moments I had strongly voiced caution on this thematic sector.

In this note, I will provide a concise update on the geopolitical situation between U.S. and China, the internet sector’s fundamentals, and updated technical analysis on key names of interest.

Longer-term members will know that I’ve been constructive on China at the beginning of the year, and discussed great caution as BABA approached the 115-120 level by mid January. I first retargeted 100 when BABA traded 115, followed by 90 when BABA was at 100 (feel free to see previous notes).

Here are 2 Key Public Tweets (make sure to follow me on Twitter) along with deeper context provided inside my Community:

Feb 21st, 2023:

Twitter avatar for @LarryCheungCFA
Larry Cheung, CFA @LarryCheungCFA
It is not yet safe to re-enter China. Wait. There is absolutely no rush. Patience is your biggest asset in this environment.
5:24 PM ∙ Feb 21, 2023
73Likes4Retweets

Feb 28th, 2023:

Twitter avatar for @LarryCheungCFA
Larry Cheung, CFA @LarryCheungCFA
We need $BABA (and $KWEB equivalents) to trade 80 or sub 80, shake out all the HFs with short-term bets, all the weak hands, and all the speculators And then it will be time to carefully accumulate for LT A slow grind down is Not safe price action Represents slow distribution
8:15 PM ∙ Feb 28, 2023
48Likes4Retweets

As we experienced a heavy Sell in China in early March, I discussed that the sector was approaching attractive levels again with specific parameters I was looking for.

At today’s levels, it’s no longer wise to fall into overly fearful thinking on the sector, in my view. However, we’re not yet at basement bargain levels yet - although we’re not far away (discussed below).

Of course, Investors who scaled out at significantly higher levels (as we did) have the upper end on re-entry considerations due to psychology and hands of strength.

Let’s dive into where I believe China becomes buyable, and what are the key signs that will let us know when the risk/reward is on our side. Concise education will also be provided on how to assess this sector and understand what catalysts drive buy-side thinking and behavior.

I provided proactive guidance to members to navigate scaling out of China during extreme euphoria.

Excerpt from Mid-January Investment Strategy: Read Here

And it is my intention to help the Community safely wait & hunt for enduring value now that enter a market phase of confusion, danger, and frustration.

Patience, patience, and...patience!

As you can see from my intermediate-term methodology, now public readers see my ideas materialize from a multi-week/multi-month standpoint.

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