Chinese Stocks Keep Getting Cheaper

Earlier this month, Barron's ran a story about a money manager who called Alibaba, China's e-commerce giant, "one of the cheapest stocks I’ve ever seen." At the time, Alibaba had fallen 57% over the prior year. The company was worth just $300 billion, Barron's Andrew Bary noted, versus $1.5 trillion for U.S. rival Amazon.com. 

From a valuation perspective, there were lots of reasons to buy the stock. But if it was cheap then, it's even cheaper now. In just 10 days, Alibaba has tumbled an additional 22%, including a 10% decline today.

With Alibaba and other U.S.-listed Chinese stocks, the fundamentals and the price investors pay for them just haven't mattered. Instead, the stocks have traded on fears of a Chinese crackdown on tech, along with a separate U.S. crackdown on Chinese-listed stocks. It's a combination filled with uncertainty. There's usually a price for everything but maybe not in this case. 

In assessing the situation, Barron's Reshma Kapadia writes: "The backdrop for Chinese stocks continues to darken, amid concerns China could be drawn into Russia’s war, more Chinese cities going into lockdown as Covid infections hit levels not seen since early 2020, and regulatory pressures come back into focus amid reports that Tencent Holdings could be slapped with a record fine."

Here's more from Reshma: 

Chinese internet stocks have fallen more in the last 13 months than U.S. technology companies did during the comparable period in the early 2000. But that doesn’t set up Chinese internet companies for a near-term bounce like the one enjoyed by the Nasdaq at this point in 2000, according to Nicholas Colas, co-founder of DataTrek Research in a note to clients last week.

“No one still seems to have an edge on the end of the Chinese government’s regulatory crackdown of Big Tech,” Colas writes in a recent client note. “What we can learn, however, from the deflating of the 1990s dot com bubble is that Chinese tech could still have a long way to go lower still.”

You can read the rest of Reshma's story here.