As we know, Chinese stocks have seen a massive run of epic proportions over the past 30-40 days. The Hang Seng Index has soared almost 3,000 points in a non-stop run that I’ve seen only two-three times over the last four years. One of my most familiar names within my China coverage is Trip.com Group Ltd. (TCOM), writes Larry Cheung, founder of Letters from Larry.
The rally has taken place during the context of US-China tariff talks intensifying. The macro landscape has made catching this rally either very difficult or very easy to miss. Regular followers of my work know that I have had a long-term bullish view on China -- and that it has undergone a shakeout phase that has turned nearly every retail investor skeptical on the sector. Some even blame the CCP for the terrible performance of the market. This is understandable.
It is due to this type of sentiment that I am excruciatingly selective about talking opportunities in China ADRs. After years of studying, researching, and trading this sector, I’ve come to conclude that the volatility and dragon-like whiplash of China/Hang Seng stocks makes it all but impossible to have the willpower to hold for higher.
Trip.com Group Ltd. (TCOM)
So what do we do if we missed the rally? Chase for higher? The rally has led a lot of people into the FOMO stage. With its powerful upside price cycle, more and more people are buying higher/elevating their cost basis in anticipation of higher prices. And of course I hope that works out.
But I’ve done that in the past, and I will never do that again. Not in China stocks. Instead, the safer way is to wait for a massive China selloff that backtests an important area of value, which is exactly what Trip.com did recently. And given that, I told our friends: “I like the stock.”
One last thing: The best way to play China’s consumer strength is NOT Alibaba Group Holding Ltd. (BABA). The stock that measures China’s consumer confidence and spending best is Trip.com.
