The latest quarterly reports from major Chinese companies are further evidence that the local market is the preferred market for stock pickers. “The results were outstanding but unique to certain companies,” Lorraine Tan, director of Asian equity research at Morningstar, said in a phone interview with CNBC Pro. “The overall trend is that the weakness reflects macro trends and the guidance is cautious. “Individual companies that outperformed did so because they had more resilient product portfolios or business market positions,” she said. Notably, Alibaba’s and Tencent’s capital expenditures in the quarter ended in June, respectively. This doubled from a year ago to US$1.66 billion and RMB8.73 billion (US$1.22 billion) respectively. Observations by Laura Wang, Morgan Stanley’s China equity strategist, and her team suggest that domestic demand for Chinese data center company Universal Data may be improving. On August 21, strategists put the U.S.-listed stock on their focus list for China and Hong Kong. ”, especially given its land deal in Malaysia. Another Chinese stock with increasing risks for overseas growth is Temu parent PDD Holdings, which is scheduled to report earnings before U.S. stocks open on Monday. As of this week Five, PDD has the No. 2 weight in the CoreValues Alpha Greater China Growth ETF (CGRO), which launched in October 2023 and is less than a year old. Ben Harburg, the fund’s portfolio manager, was involved in early investments in Chinese companies Meituan and NIO before they went public. “We think we can trade China’s public markets better than other ETFs,” he said, noting that he of companies have offices in the United States and China. This provides ETF managers with timely information for buying and selling Chinese stocks. Harberger told me that the team changes the portfolio “every week or two” and that “China is too complex to trade passively.” According to the ETF website, CGRO holds more than 30 companies that meet the requirements of “not harming U.S. technology, “economic interests or values” or other Chinese companies that appear on the U.S. sanctions list. The CGRO ETF was down 4.3% year to date as of Friday’s close, while the Kingsoft CSI China Internet ETF (KWEB) was down 2.3% during the same period. “We haven’t seen outflows yet. We’ve been stable, but we have to do well in the market before people put money in,” Harberger said. “I think it will be a case-by-case basis. Rather than a rising tide.” Since the outbreak, Chinese stock markets in Hong Kong and mainland China have generally struggled to recover significantly due to a series of uncertainties about growth and policy. Harberger said he did not expect Beijing to stimulate economic growth and that the catalyst for China’s stock market decline was more likely to come from a decline in U.S. stocks. “I do think the U.S. market is unreasonably valued, so at some point you’re going to see some correction,” he said. “Japan and India are absorbing some of the auxiliary capital that should have flowed into China.” Japanese and Indian stock markets are up 14% and 12% respectively this year. —CNBC’s Michael Bloom contributed to this report.
