Chinese Stocks Crash, Sell Or Buy ?

There was a huge panic sell-off in china's markets after the Chinese regulatory crackdowns, fine was imposed on tech industry like Alibaba (BABA, 9988), Meituan (3690) and Didi Global (DIDI), Tencent (TCHY, 700).

Chinese Communist Party ( CCP ) took aim at education companies like TAL Education Group (TAL) and New Oriental Education (EDU) moves to compel to turn into non-profit companies and banned from going public or raising capital from foreign investors.

So why is this happening? Crackdowns, Crackdowns everywhere.

It would seem that right now, no one is safe from the china market given the government has the ability to swiftly disrupt an entire company or even an industry. So the question comes, is the china market too risky to invest in? Or a blessing in disguise to profit within this crisis?

I feel that the growth potential of the Chinese market is too great for investors to overlook, however before making investments, it is necessary to understand the regulatory risks and the government's intentions.

Believe it or not, the government is not cracking down for fun to put an end to capitalism or deter foreign investment.

Part of the reason for the regulatory crackdown is intended to stop monopolistic practices.

Quoting an example from The Motley Fool:

Xiaomi (OTC:XIACF) has now overtaken Apple (NASDAQ:AAPL) in the global smartphone market -- with a 17% market share (which is even bigger in Mainland China). It achieved this by capping its profit margin on smartphones at 5% to keep prices low and squeeze out industry peers. (Compare that, for example, to Apple's profit margin of 27%.) In fact, you could get a 6.53-inch HD 64 GB smartphone from Xiaomi for $160 -- just don't ask questions about customer support or how long it will last.

So it was only a matter of time before the government stepped in to get them back on track, for the sake of the economy and the people.

With this, I believe this might be beneficial to the industry to aim for constant growth, while us getting to experience future innovative launches for consumers like you & me. This would increase healthy competition across their own industry, but I do not believe it would materially undermine each other's significant competitive advantages.

In conclusion, is to refrain companies from using monopolistic practices to stay relevant.

Personally, I'm only comfortable owning a tiny number of selected few Chinese companies that I truly understand, one of them being Alibaba (9988).

Aside from that, I prefer to invest in Unit trust & ETFs that are well-diversified across sectors and industries. This allows me to benefit from China's growth without having to worry about company or industry-specific risks.

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#JustinInCase: The above information is provided for general information only and does not constitute financial advice. While we have taken care to check the source of the information, we cannot guarantee that the information is accurate, complete or will suit your individual financial needs. Please refer to the original source for more details.