What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing if you've been paying attention to the stock market. Recently, you may have noticed some crazy moves in the chinese stock market. In the second half of last week, the hong kong index exploded to the upside by 17. This is extreme volatility that you would almost never see in the us markets for many us-listed chinese stocks.

The moves have been even more extreme. The e-commerce giant alibaba has seen its share price increase by 30 percent. The electric car company neo saw its shares trading 26 higher and another chinese euv company x-punk has skyrocketed 50 percent, but it's important to put these moves into perspective. The hong kong index is still down almost 30 percent from its 52-week highs.

Despite the recent pounds alibaba, which was once a wall, street darling, is still down almost 70 from its all-time highs. This was driven in large part by a worsening of relations between the u.s and china, and fears that chinese stocks could be delisted from the major u.s exchanges. But recently chinese regulators said that they will start supporting ipos of chinese companies on offshore exchanges and crackdowns. On the technology sector will soon come to an end.

Chinese regulators are holding active discussions with their u.s counterparts. To avoid the listings, they believe there is room for a compromise that will avoid the nasty listing that people are worried about if they can really follow through. With this, it could be a huge opportunity. China has 1.2 billion people and their economy is growing rapidly for years.

It was a coveted location for international investors with massive success stories like alibaba and tencent. However, since the summer of 2021, many investors turned their back on china, calling it uninvestible because of heightened regulatory risk and delisting potential. Now it looks like this may be finally changing in this video, we'll look at just how big a deal this news could be and what it could mean for chinese stocks going forward, keep in mind that we are not financial advisors and this video is for entertainment Purposes only make sure to do your own research and talk with a professional before making any investment decision. Cqq is one of the most popular etfs for chinese stocks from its inception in 2017, through its peak in 2021, it increased 150 percent which massively outperformed the s p 500.

However, since this peak it has been more than cut in half losing 58 of its value. At the recent lows, according to shark tank investor, kevin o'leary sentiment around chinese stocks has gotten too negative and he is actively buying the dip yeah. Any time you get an analyst calling stocks multi-billion dollar market cap stocks growing in an economy, that's larger than ours. Our growth rate is um uninvestable, that's a buy signal, that's what that is.

What's been against china, the headwinds for chinese stocks. All of them is the adr structure to understand that, basically, the law has been changed on them. They've got basically 24 months to get their audit act in order or they're going to get the listed stateside now, even if that were to happen, which i think it's not going to happen, they're going to fix this before that, does it doesn't stop the growth rate Of these companies, there's yes, a lot of people in china, so if you're trying to figure out, how do i invest in an economy that is probably going to be the world's largest economy in x number of years? Look, i know we're competing with them, but that doesn't mean i don't invest in it. Basically he's saying that chinese companies are doing fine and the delisting risk is just noise that does not affect the daily operations of the companies to see.

If this is truly the case, we can look at a few of the top tech giants. Five of the most important chinese companies are tencent, maituan, alibaba, baidu and neo. These companies are roughly equivalent to facebook. Uber eats amazon, google and tesla.

This chart here shows a revenue growth of these five companies indexed at 100 for the first quarter of 2018.. The red line represents the beginning of the chinese bear market. There does not appear to be any meaningful decline, neo, which is represented by the gray line continued its hyper growth metoin represented by the dark blue line, actually accelerated its revenue, growth, tencent, alibaba and baidu didn't grow much as these are more mature businesses, one of the Biggest fears driving the chinese shares lower, is fears around d-listing, but d-listing isn't actually all that bad. If you own a stock that is delisted, it's not as if you lose all of your value.

You still own your shares. They just can't be traded on a new york stock exchange, they'll be either transferred to the over the counter markets or a foreign exchange. Additionally, many u.s listed chinese companies, including alibaba baidu and others, have preemptively pursued dual listings on the hong kong stock exchange, which is immune from usd listing risk. The problem is most retail stock.

Brokerages do not support trading hong kong listed stocks, thereby forcing their customers to bear delisting risk. That's why i use moomoo, which is also the sponsor of this video moomoo, offers commission free trades on u.s stocks and etfs, but, unlike other free brokerages, they do not accept payment for order flow and they do support trading of hong kong listed stocks. Additionally, their free technical tools and features are the best and easiest to use of any of the trading apps that i've used. They offer level 2 market data, which shows a comprehensive order book, which shows how many people are willing to buy or sell a stock.

At a given price, they also show up to date short interest data, as we've seen from events in early 2021. This can be an extremely powerful tool and moomoo has a special deal for viewers of this channel for a limited time, you'll receive up to three free stocks worth between three dollars and thirty five hundred dollars, plus one share of neo. When you open an account and fund with any amount, even just one dollar, just click the link in the description below to get your three free stocks and join moomoo's community of 17 million users and now back to the video. The specific issue revolves around the public company accounting oversight board or pcaob.

Every public company has auditors who go through their books and make sure their reported financial statements match up with the company's economic reality. All companies, including those based in china, have a professional auditor such as kpmg or pwc auditing, their financials in the us. The level of scrutiny goes one level further with a quasi-governmental entity called the pcaob. The pcaob effectively audits the auditors to make sure that everything is above board at a higher level.

The problem is, the chinese government does not allow foreign regulators to audit companies headquartered in china, as they feel that this could be a national security concern. So, even if a chinese company like alibaba, wanted to comply with the u.s regulations, they're not allowed to do so. If companies fail to be audited by the pcaob for three consecutive years, they'll be forcibly de-listed from the major u.s exchanges at the current rate. This is set to happen in 2023, many retail investors started selling their us-listed chinese stocks in fears of this delisting.

As we mentioned earlier, you don't lose any real economic value from the d-listing itself, but it can create a lot of technical selling pressure as many brokerages. Don't support trading on non-us exchanges and thus mark the positions as closing only but all this may be a moot point, as it looks like the greatly feared mass delisting may never happen. Recently, chinese state media reported that chinese officials are actively working with their american counterparts to come up with a solution to the de-listing issue. They are reportedly working on a solution whereby non-sensitive audit data can be viewed by the pcaob and sensitive data will be reviewed by chinese officials under some kind of cooperative arrangement between the two regulators.

If what they're saying is true, this could be huge. We've already seen stocks like alibaba react positively skyrocketing more than 30 percent to the upside in just two days, but even now there remains a massive valuation gap between the chinese mega cap tech companies and their us counterparts. This chart shows a relative valuation of chinese tech stocks versus their us peers, based on forward price earnings ratio or price of sales ratio for unprofitable companies. Most of the chinese stocks, trade at massive discounts, for example, alibaba's forward price earnings ratio of 12 - is less than one-third of amazon's forward pe of 44..

The one case where the chinese stock trades at a premium is 10 cent, which has a forward p e ratio of 20 compared to just 15 for meta platforms, formerly facebook. This isn't because tencent is particularly expensive. It's instead because facebook's valuation has been crushed recently as zuckerberg deals with regulatory scrutiny, apple's privacy changes and competition from tick tock. The point is chinese.

Tech stocks are trading at very cheap valuations based on traditional metrics, despite the fact that the chinese economy is still growing far faster than that of the us. Most economists expect the chinese economy to grow at five percent in 2022. This was considered as a big disappointment, as it is one of the slowest growth numbers for the country in at least a decade, but it's still significantly higher than the 3.7 percent that the us economy is expected to grow. If you just look at the math, china has four times the population as the u.s.

If they can eventually become even half as rich on a per capita basis, their economy will be double the size. The prominent hedge fund manager, ray dalio, says its foolish should not have at least a little exposure to the chinese stock market, given how important they're becoming to the global economy. This growth opportunity is why chinese companies did so well and their stocks became so popular in the past. Of course, if we've learned anything over the past couple years, it is that the stock market, and especially the chinese stock market, is very unpredictable, but the latest news we've received is undoubtedly an incremental positive for full disclosure.

I personally own shares in some chinese stocks, including alibaba, alright, guys that wraps it up for this video, don't forget to click the link in the description below to get your three free stocks with moomoo. What do you think about chinese stocks? Do you think the us and chinese regulators will be able to work out a compromise? Let us know in the comments section below as always. Thank you so much for watching and we'll see in the next one wall, street millennial signing out.