Why Chinese Stocks may be risky for the time being

Oct 8

Recent moves by the Chinese Government - termed "Three Arrows", facilitated a decrease of interest rates among various other changes of policy made for loans, borrowing and payment etc. This cumulated action signalled to investor's that China was reopening its economy, thus leading to a huge surge in investment in Chinese Blue Chip stocks, and the entire stock market in the region, including the Hong Kong Market. However, as stocks surge in price with increasing volume, it must be noted that they have been over-bought - 20-30% growth on average before the policies are even put in place. For instance, stocks like the HK exchange itself HK:0388 experienced a doubling in price. This, along with the fact that ETFs of the Chinese markets in Singapore and Taiwan both received much more purchasing power than even the Chinese markets themselves, highlight a significant irrationality in the markets right now. Considering the correction in trends recently, it would not be advisable to purchase stocks in the Chinese markets right now.