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Wait A Minute Before Buying Alibaba, JD On The Dip: Barron's

Gary Anglebrandt
·2 min read

Chinese stocks are looking tempting following some declines in the past two weeks, but traders could get an even lower buying opportunity in the weeks ahead.

That's according to a Barron's article today

More Pressure: The cancelled Ant Group IPO and a rotation in the stock market have pushed down Chinese stocks in the past two weeks, with Alibaba Group Holding Ltd (NYSE: BABA) down 11% and JD.com Inc (NASDAQ: JD) down 6%, Barron's said. New regulations in Beijing that put the brakes on the Ant IPO have spooked investors who wonder what other Chinese internet companies might be affected.

More pressure also could come from a possible final round of measures against China from the outgoing administration of U.S. President Donald Trump. 

On Nov. 12, Trump signed an executive order adding more Chinese companies to a list of firms the White House believes have ties to the Chinese military. The order bars Americans from investing in companies on the list.

Political commentators speculate that Trump is trying to tie the hands of U.S. President-elect Joe Biden, by putting into place last-minute measures that the incoming administration will find hard to walk back.

There also has been more talk in Washington — including at the U.S. Securities and Exchange Commission — of delisting Chinese firms from U.S. exchanges.

Yesterday, Financial Times reported that investors are taking a second look at their holdings of internet companies based in mainland China.

The article listed Tencent Holdings Ltd (OTC: TCEHY), Alibaba and Meituan-Dianping -- available in U.S. markets under Meituan Unsponsored ADR (OTC: MPNGY) -- as some of the companies seeing a shift in sentiment in the wake of Beijing's new regulations and the latest additions to the U.S. ban list.

All of this will lead to more volatility and possibly some better buying opportunities, Barron's said.

Beyond Inauguration Day: Traders also should note, though, that relations between the U.S. and China aren't likely to return to their pre-Trump days after January 20. The Biden administration is expected to have a less openly confrontational approach to China, but it is not expected to usher in a major thawing in relations. Biden has endorsed a tough stance on China, and he comes from the former Barack Obama administration, which promoted the Trans-Pacific Partnership trade deal, a move to isolate China geopolitically. The political momentum against China has been building for several years now in Washington — and is one of the few areas of bipartisan agreement there.

China also is bracing for more tensions, Financial Times reported earlier this month: "Beijing expects less volatile relations with Washington under Joe Biden but does not believe the new administration will veer significantly from the hardline approach taken by Donald Trump, according to Chinese government advisers and analysts."

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