Clearly, the global markets are currently focusing on the china market. Many have been saying that it is because of the statement released from the CCP Politburo. To me? Haha, no it’s not, it is also not because it is “undervalued”. If you look at the charts, the entire market has been muted for so long with little to no momentum for more than 2 years. Let’s face it, investors who have dabbled with china stocks via the HK or US market would most probably be hurt by it at some point. Much worse for those who have bought in since many HK-linked ETFs IPOed.
Now, this post is not about what we should be doing but rather how we should react to it since the market has so called “awakened”. In today’s post, we will go straight to the point and list the reactions towards the current situation of Chinese stocks
If you have not bought it before the jump, it might be too late now
No, it has not hit the ceiling or what not. Instead, if you weren’t able to spot or executed trades before the boom, you probably did not believe that it was undervalued in the first place. As such, please refrain from buying in now that there is a lot more positivity in these counters and ETFs. The main reason is because investors should always learn how to spot undiscovered value and avoid following the trend. While it is true that we all make mistakes and we might have missed out on the undervaluation of certain stocks and assets but what we can take away from this “lesson” if you like is to punish yourself by staying out of it and look out for the next jump.
If you have bought since the high and held till now
Well, it must have been painful. I do not think that most of you have even broke even yet as of today. Instead of rubbing it in, I must give you a pat on the back. Honestly, this group of people were wrong and they have held on probably due to their passive personality and the lack of know how in dealing with such long term dips. I guess this group of people should continue to hold if they are still fairly red or if they have some funds to deploy, buy some and start trading when volatility returns.
Those who have been DCAing and trading throughout
Congratulations people in this group, you are most likely to be the happiest group of people amongst the investors in the list. The undervaluation and high interest in some counters and ETFs have helped traders and investors trade with a fairly simple pattern and those 2 years of boring price movements must have profited enough such that they are currently only seeing green and greener at this juncture. As such, do what you please, I believe that most of us in this group would have started selling and getting some insurance in case this boom is going to cause swings as it rises.
Closing Thoughts
The china play might not have been the best play amongst all possibilities. Now that it is gaining some traction, investors should not just jump in and hope for the best. Instead, look at the examples above and consider the ramifications of our decisions before the jump. That would probably benefit investors way more than the dollar and cents that we might get by just jumping in on trends.
