How To Play Collapsing Chinese Stocks as Political Tensions Rise

Today, we’re going to take a look at a sector of global markets that’s been getting a lot of attention lately… and rightfully so. Chinese stocks have been going down in 2021. 

The Chinese stock market went from one of the leading global markets to one that’s lagging behind… all in just three short months. 

We saw a record-breaking rally in Chinese stocks in early March. And then investors were shocked by how bad the reversal has been since. Within two weeks, the nation’s benchmark CSI 300 Index had fallen 14% from a 13-year high. 

So what’s an investor to do amid this Chinese stock market meltdown?

Chinese Stocks Are Going Down Fast — Here’s What You Should Do

For those of you who’ve been paying attention to the markets, you’ve likely noticed that Chinese stocks listed in the U.S. (and out of China) have been getting smoked lately.

The main reason Chinese stocks are going down so hard is because of mounting political tensions between the U.S. and China.

Believe it or not, U.S. President Joe Biden has continued a lot of former President Donald Trump’s saber-rattling with Beijing. 

However, unlike Trump — who was focused on negotiating good trade clauses — Biden’s administration has its sights set on something else entirely when it comes to the Chinese government. 

Instead, the Biden administration has been aggressive in its discussions on what the Chinese regime does in regard to human rights and governing its people. 

But nonetheless, the market has been incredibly weak, and these stocks are suffering the toll.

And that got me thinking….

Is there a way to play falling Chinese stocks that’ll deliver us decent gains with limited risk?

Of course there is. If you know how to trade pairs — as seen and discussed at length in my Money Links strategy — you can obtain a market-neutral point of view.   

With this trading strategy, it doesn’t matter if the market is going up or down. We just have to figure out which one of two stocks is likely to outperform the other…

And we can find that by looking at past trends in Chinese stocks.

For a deeper look into which sectors investors should watch, check out our video below. And as always, email any trading questions to jeff@joyofthetrade.com and stay ahead of the markets — especially these choppy ones — by subscribing to our YouTube channel.

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Chinese stocks going down

One Response

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