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Chinese Internet Weekly: Mea Culpa

ALT Perspective profile picture
ALT Perspective


  • For Chinese stocks, the tough macro backdrop last week was just another flesh wound on a badly battered body with multiple lacerations.
  • The overly exploited VIE risk continued to be effective in spooking the market, with an unsubstantiated Bloomberg report on a China ban making the rounds many times over.
  • A SEC statement on the lack of access to audit papers in China reignited fears over the delisting of Chinese ADRs.
  • The strong cash position of JOYY pushing it to potentially see a negative enterprise value exemplifies the undervaluation Chinese stocks are experiencing.
  • My portfolio is deep in the red but I am more ashamed of being adamant about how wrong the naysayers were. I'm sorry for pushing in vain the weekly narrative that has been supportive of Chinese stocks.

Young adult against zombie hordes

gremlin/E+ via Getty Images

By ALT Perspective for Chinese Internet Weekly

There were numerous developments for global investors to digest last week, causing the stock markets to be more volatile than usual. Commentaries regarding the Omicron COVID-19 variant continued to fly in from various quarters, from medical

This article was written by

ALT Perspective profile picture
I am honored to have been categorized as a 5-Star financial expert and ranked among the top 2% of financial bloggers on TipRanks in 2017/18. For a period, I was among the top 3 “Opinion Leaders” for Insider Ownership and Services, as well as top 5 for Long Ideas and Fund Holdings. I am an avid reader of market news and company publications with the aim of improving my investment acumen. I enjoy expressing my findings and opinions through writings. My appreciation and understanding of business strategies improved to a whole new level since completing an MBA (Distinction) from a FT100 MBA school. I have worked in companies with businesses that span multiple industries, according me with the exposure to a myriad of sectors.Check out my Author's Picks and over 190 Editor's Picks, among the highest in Seeking Alpha, if not the most.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of BABA, BIDU, JD, NTES, TCOM, TCEHY, ZM, SDGR, TDOC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (244)

Sometimes we look out side US, unwilling to invest in China.
Kautilya01 profile picture
You have my respect.
Funny thing is - I cut my losses in early Jan, and am reading this in Feb.

Some food for thought - May not be a bad idea to cover China market (and not just tech) more extensively starting now. Clearly this is what's meant by 'be greedy when everyone's fearful'

If you know anyone who covers China extensively and regularly - I will be eternally grateful for pointers here.
Eg - One thesis I have, Chinese home grown consumer brands will take over more displacing western brands (hyper nationalism, mature market etc etc)

So maybe the solution is not to stop following but to dig deeper for value. It is THERE!
Owen213 profile picture
read and enjoy your articles, the "chinese sector" reminds me a bit of the MJ sector right now - lots of good companies, expanding, making money but too risky for serious investment, at least for me.
I think you may have marked the absolute bottom (hopefully) when you wrote this.
ALT Perspective profile picture
@Brad Balter Glad to be of service!
Jon Ip profile picture
Been reading your articles for a long time now, your news coverage and analysis are excellent, hope you don't lose confidence in your abilities. IMO, a lot of it is unlucky, negative events one after the other, like losing a dozen coin flips in a row.
ALT Perspective profile picture
@Jon Ip That's a great analogy. It's like, how could it be right? 12 times in a row. But it happened.
NO DELISTING. JUST HYPE ! Official China security regulator stetement to VIE


CSRC Spokesperson Answered Reporter Question Regarding Recent Statement
  Reporter: Recently, the SEC released its rules for implementing the Holding Foreign Companies Accountable Act and certain Chinese company announced that it started to delist from the U.S.. This has attracted wide attention in the market. What is the CSRC’s comment on this matter and what are your views on prospect of audit oversight cooperation between China and U.S. and that of domestic companies’ listing in the U.S.?

  Spokesperson: We have taken notice of this recent development and the market’s concerns over the audit oversight issues and the prospect of domestic companies listing in the U.S. The CSRC and relevant Chinese regulatory authorities have always been open to and fully respect Chinese companies’ independent choices of overseas listing venues in compliance with relevant laws and regulations. Recently, some overseas media reported that Chinese regulators will ban overseas listing of companies with VIE structure and demand Chinese companies to delist from U.S. stock exchanges, which is a completely misunderstanding and misinterpretation. As far as we know, some domestic companies are actively communicating with domestic and foreign regulators to seek listing in the U.S. markets.

  In terms of audit oversight cooperation, the CSRC has recently conducted candid and constructive communications with the U.S. SEC and PCAOB to address issues in bilateral cooperation and has made positive progress on several important issues. We believed that as long as regulators on both sides continue to conduct dialogues and negotiations in the spirit of mutual respect and trust, and deal with regulatory issues in a rational, pragmatic and professional way, we will certainly be able to find a mutually acceptable path of cooperation. In fact, both sides have been cooperating on audit oversight of US-listed Chinese companies, and worked together on pilot inspection programmes in order to find a more efficient way of cooperation, which has laid a good foundation for future cooperation. In recent years, however, certain political fractions in the U.S. have turned capital market regulation into part of their politicizing tools, waging unwarranted clampdowns on Chinese companies and coercing them into delisting from U.S. stock exchanges. This lose-lose mentality goes against the fundamental principles and rule of law of the market economy, harms the interests of global investors, undermines the international status of the U.S. capital markets, and benefits nobody. In today’s era when the capital markets are highly globalized, it has become more imperative than ever for regulatory authorities to engage with each other on audit oversight cooperation in a pragmatic, rational and professional manner. Forcing Chinese companies to delist from U.S. stock exchanges is by no means a responsible policy option.

  The series of policy measures that relevant Chinese regulatory authorities have introduced in the past months with respect to regulating the development of the platform economy are aimed at limiting monopoly, protecting SMEs, safeguarding data and personal information security, and preventing the disorderly expansion of capital. Regulators in other parts of the world are also taking various regulatory measures against such emerging issues and challenges, with a view to promoting the sound and sustainable development of platform economy. Therefore, relevant policy initiatives of the Chinese government are not targeted at specific industries or private companies, nor are they necessarily connected to overseas listing of Chinese companies.

  In the process of implementing the relevant policy measures, the Chinese regulatory authorities will continue to steadfastly promote reform and opening-up, stick to the principle of the “Two Unwaverings”, strive to engage with stakeholders including investors, companies and peer regulators, and further enhance policy transparency and predictability. CSRC will also continue its candid dialogues with its U.S. counterparts, and endeavour to resolve the remaining issues in audit oversight cooperation in the near future.
MIMM profile picture
@PeterAgh the date is 05/12
@PeterAgh Muted for fake government account. It appears this account was recently created by a “50 Cent Army” member.
ALT Perspective profile picture
@MIMM Not sure if I get you correctly but in case you are thinking it's May 12, it's not. In China and many parts of Asia, the date format is DD/MM rather than MM/DD.
Cognoscente profile picture
A new dawn is coming, BABA is up 10cm in HK.

We will be back!
Love reading your articles. Don’t stop. Thanks.
Hi, ALT.

This is my first comment after following you for last 2 years. Thank you for being factual and objectives. I think many readers who have lost monies on BABA are just simply very angry especially after following your bullish call on BABA. They will say silly and mean things as they forgot that you are merely sharing your views and analysis, not someone guaranteeing their success on BABA.
ALT Perspective profile picture
@Alexleeyc Thanks for your support. I am cool with anything fellow or former shareholders want to say if it helps them to let off some steam. It's those who have no intention to own shares at all and coming to spew unsubstantiated accusations or doubts about Chinese stocks/China. Well, I used to be quick in rebutting. However, I have come to realize, they might have been wrong in their facts but they were right in imploring readers to avoid the stocks.
06 Dec. 2021
@ALT Perspective Similar to many of the comments here, thank you your informative articles, we do need logical analysis in the times of irrational volatility. Stock like BABA and many other Chinese stocks are in the political crosshair, compounded by illogical negative social media sentiments.
Brathahn profile picture
@ALT Perspective You helped me a lot to grow my conviction in chinese stocks. Even though I'm red big times, I'm very thankful for educating me over the last few months. Keep ya head up buddy. Diamond hands all da way.
Burt Rothberg profile picture
Congratulations on being a bigger man. I know this doesn't help the pains of your portfolio, but I respect it.
Time to move on from China. For the sake of the world, I hope they aren't going back to Mao/Soviet style socialism, but I;m not going to bet any money on it.
The only thing that seemingly matters is Masayoshi Son and Softbank ... Alibaba's stock will not go anywhere until the Son issue is fixed.
Claudius Odermatt profile picture
@Aukman the Nvidia and Arm deal is getting axed. I’m sure Xi has been satisfied.
I feel a sense of honor and honesty coming from the author. Being able to reflect back upon one's thought processes and conclusions is an important part of analysis. We can't always be right, but we can always learn, and what we learn we take forward into making us better investors.
BABA is up 10%.

NYU’s ‘Dean of Valuation’ explains why he’s ready to buy Alibaba said by CNBC. Who have access to this report.
Dinjax profile picture
@ALT Perspective I feel your pain as I've been suffering with my BABA, BIDU, JD, ATHM, VIPS and WB shares. At these ridiculous valuations recovery seems more likely than further declines, but I didn't do very well catching this falling knife. At least last night's 60 Minutes segment on China hasn't caused further carnage today.

If you're interested in other China ETFs check out KSTR. It includes the 50 largest companies listed on Shanghai's SSE Science and Technology Innovation Board and has held up fairly well during this bloodbath.

I continue to enjoy your analyses as they are well reasoned. Don't beat yourself up too much; it's impossible to always have perfect timing.
Whatever you decide to do with your own investments, I hope you'll still keep "talking truth to power" (i.e the media).

The way things are, Bloomberg could even run a piece (citing "sources close to the issue", of course) claiming that huge, many-tentacled, people-devouring aliens had been found in BABA's basement, and the share price would still drop 10%.
ALT Perspective profile picture
@LongGone21 Thank you. The media sure is not giving the good news over the weekend and today from Alibaba and China the attention they deserved.

Ceteris paribus, if it was Amazon benefiting from the following, it would be up more than 10%, especially if its stock was similarly beaten up over the past year.
i) Announcing a similar reorg and a promotion of a deputy CFO for bringing in fresh ideas and execution,
ii) the central bank freeing up a much higher than expected liquidity for banks,
iii) the government finally announcing they will step in to manage the restructuring of the big elephant in the room in the form of Evergrande, and
iv) the securities regulator refuting they intended to ban VIE (the big scary news dominating last week).

The market seems to be pricing in the benefit of the reorg for BABA, more so than point ii-iv. JD is down 3.5% while PDD is up only 2.9%, far from recovering its losses last week.
@ALT Perspective Senior let night 12/06 Doomberg were talking about one of there reporters who is blocked from re-entering China-----Doomberg, reporters were very upset--------BUT last I checked China is a sovereign country and they don't report to Doomberg are any other FAKE News outlet!!
@alt Perspective
You see You have capitulated and today BABA +8%!
This sell off has been irrational based on fundamentals!
We know markets are often irrational and often manipulated.
In the long run you have explained the value of BABA. E-commerce in China in not disappearing! Come on!

Please keep up the good work!
ALT Perspective profile picture
@break-point Wait for the "this is nothing but a dead cat bounce!"
@ALT Perspective short term who knows ... medium and long term you are bullish! and you have very valid reasons. Time the market is extremely difficult.
@alt Perspective

Your articles were well-reasoned and logical. The market is not. Please keep up your good work!
Steven Miller profile picture
@ALT Perspective
You have my respect. Keep writing. I will keep reading.
ALT Perspective profile picture
@Steven Miller Thank you for your heart-warming comment!
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