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Second Reminder: Sell China

There's a documentary on Netflix called The China Hustle about people in the west setting up western extensions of Chinese companies. The Chinese companies are claimed to be big and successful, but they're often much smaller.


Beijing’s sweeping crackdowns of its technology and education sectors
has unleashed shockwaves across global markets, causing U.S.-listed
Chinese stocks to post their biggest back-to-back losses in over a

The Nasdaq Golden Dragon China Index plunged as much as 6.9% Monday after regulators in China unveiled an overhaul of its education sector that bans firms that teach school subjects from making profits, raising capital or going public. The gauge -- which
tracks 98 of China’s biggest firms listed in the U.S. -- is on pace for
its biggest two-day drop since 2008 and has lost more than $765 billion
in value since reaching a record high in February.

“The regulatory uncertainty is significant and is something that is
impossible for investors to quantify,” said Michael O’Rourke, chief
market strategist at JonesTrading. “Investors should be cautious until
the Chinese government affirms the legality of these structures,” he

Some large investors have already started to unload their shares. Cathie
Wood’s flagship Ark Innovation ETF cut its holdings of China stocks to
less than 0.5% this month from a high of 8% in February. The fund
completely exited its position in tech-giant Baidu Inc. and has just 134
shares of Tencent Holdings Ltd. Its only other position, Chinese
property site KE Holdings Inc., has dropped 58% so far this year.

They’re not alone either. In total, more than $126 billion in market capitalization has been erased from Chinese education stocks traded in the U.S., China and Hong Kong this year.

“The latest events arguably highlight that the authorities are more willing
to upset investors in pursuit of their broader political goals now than
they were a few years ago,” wrote Oliver Jones, senior markets economist
at Capital Economics in a note to clients.

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