Stocks out of China - Too Cheap to Ignore
U.S. investors have taken a cautious approach to Chinese stocks in the past 12 months, however the latest earnings from Alibaba and JD re-sparked interest around these foreign investments. Stocks out of other parts of Asia, such as Taiwan Semiconductor (TSMC), have rewarded investors this year, but Chinese stocks have lagged far behind the market rally due to uncertainty around China’s economy and political relations. This uncertainty seems to be improving thanks to the latest agreement between the U.S. and China to cooperate on financial stability. This shows an unusual level of cooperation between the two countries, which restored faith in Chinese stocks trading on the American stock market.
Amongst the discussion of the newly signed agreement were capital markets, which put a relief to the idea of a possible delisting of Chinese stocks. Those fears have haunted American investors for more than a year, keeping them from buying Chinese companies despite their attractive valuations. Higher interest rates have also kept investors out of high risk investments, but with interest rates expected to come down, and with this new agreement, investor appetite might grow for China’s stocks.