Profiting off a 60% move in Chinese Equities
Updated: Mar 5
Where does China go now?
What an absolutely insane move for Chinese equities of 60%, we dive into China's recent history since the pandemic, talk about when we started getting bullish Chinese equities and some near term targets. So far they have been outperforming the U.S. equities this year, will it continue?
We also have a very dear and special guest to me, my mother Melanie Norman, that will talk about the Lunar year and what it entails for 2023!
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新年快乐!
Happy Chinese New Year! We kicked off the Lunar New year on 1/22/2023:
First, let's take a look what has been going on in China and their leadership:
Xi Jinping, the current General Secretary of the Communist Party of China and President of the People's Republic of China, has continued to consolidate power over the last year. In January 2022, he proposed the addition of a new clause in the Chinese Constitution to allow him to hold the presidency beyond 2023, when his current term was due to end. This proposal was eventually passed in March 2022, effectively abolishing the two-term limit for the presidency.
Xi has also taken steps to strengthen the authority of the Communist Party over various sectors of society, including the military and state-owned enterprises. He has launched a massive anti-corruption campaign, targeting high-level officials and generals, which has been seen as both a genuine effort to root out corruption and a means of consolidating his own power. Meanwhile, the Chinese government has continued to crack down on dissent, restricting civil liberties and tightening control over the internet. The country has also taken a more assertive stance in its foreign policy, particularly in regards to Taiwan and the South China Sea.
So what does that mean for the Chinese markets?
The COVID-19 pandemic had a significant impact on the Chinese economy, leading to a sharp contraction in the first quarter of 2020. The widespread lock downs and travel restrictions disrupted supply chains and hurt consumer spending, leading to a decline in economic activity which continued into 2021 as a result of China enforcing strict lock down policies. However, the Chinese government implemented a massive stimulus package and launched a series of measures to support businesses and households, which helped to stabilize the economy. By the second half of 2020, the economy began to recover, helped by a combination of government stimulus and a recovery in global demand.
Our tweet on November 3, 2022 from @essextrading on Twitter succinctly put into character the state of the Chinese markets, the biggest semiconductor company was hitting all time lows. We know very well that if the semiconductors are hitting all time lows then we need that to reverse for equities to go up.
The next day it happened, who was buying?
--> Warren Buffet
We can see here just how quickly sentiment can change as $TSM got bought up by Warren Buffett himself (announced November 14th) as he gobbled up a staggering $4.1 Billion in stock which became Berkshire Hathaway's 10th biggest position.
How is the chart looking for $TSM?
Better now, for sure!
We have been tracking for sometime on our feed once we saw Buffett was buying and saw that we had a potential to break lower as we saw resistance in the stock at $82 after the announcement was made (a sell thew news short term type of event). After that we carved out a nice little bottom, referred to as a "cup n' handle", and after we broke over $83 it was off to the races. It hit our initial target of $83.60 and then some!
A 59.4% move in 2 months, 2 weeks and 3 days!
Matching that of the Chinese ETF, $FXI (up +12.45 or 59.54% in almost 3 months)
Take that bank Account Annual Savings Rate of 3.0%!
We are now hitting some short term resistance and be mindful if we drop below $90. If we take this route we'd expect it to retest $83 and the daily 200 SMA.
So despite all this weakness we started noticing out performance in Chinese stocks in 2023 and the moves have been nothing short of spectacular! Let's take a look at a couple of more charts:
$WYNN, was a stock we caught much later after we noticed price was consolidating. Wynn Resorts is a luxury hotel and casino resort company based in paradise, Nevada. It was founded in 2002 by Steve Wynn and holds more Forbes Travel Guide Five-Star Awards than any other independent hotel company in the world. There resort offers award-winning restaurants, exciting entertainment and nightlife, two award-winning spas, salons and luxury shopping located in Las Vega, Macau and Boston.
We got in and took a 16% & 24% ROI in 3 weeks!