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Why the Chinese Bear Market Is About to Get Worse…

by | Jul 30, 2021

We started this week with China dominating the news as its government announced new reforms for private education companies, essentially banning the online education industry in China. 

And now we’re ending the week with China again highlighting the news after the SEC froze Chinese IPOs in the U.S.

On Monday, the Nasdaq 100 and China stocks reacted as poorly as you’d expect from the news. The Nasdaq Golden Dragon China Index — which tracks 98 of the biggest Chinese companies listed in the U.S. — fell as much as 7% this week. 

While the stocks seem to have recovered for the most part, the bearish sentiment toward China stocks is nowhere near finished. 

In fact, China stocks are getting smacked around again today because of the news of the SEC freezing Chinese IPOs…

The Securities and Exchange Commission (SEC) has stopped processing registrations for Chinese initial public offerings (IPO) — and other security sales — in the United States until it gets clarity in what the Chinese government has in store for its technology companies.

The goal behind this is to protect U.S. investors from the unseen risks of another regulatory crackdown by Beijing.

It’s the prudent thing to do. However, it’s creating a whirlwind of insanity in the stock market.

SEC Freezes Chinese IPOs and Other Market Movers

In case you’re blissfully unaware of how serious the issue of the Chinese government dismantling its own tech giants is, take this into perspective… 

Beijing’s crackdown on its technology and education companies has effectively erased $769 billion in value from U.S. listed China stocks in just five months.

These actions by the government highlight the fact that it’s more than willing to upset investors if it means its political goals for the state are accomplished. 

But more on that later…

At the beginning of this week, I also discussed earnings with you. And boy, talk about a mixed pot.

We saw some stellar earnings — the best I’ve seen in years — and some weak earnings you wouldn’t write home to mom about.   

However, these earnings are a great study in how the upside can get fully priced into a stock, and how expectations can exceed reality.

Which is exactly what happened with one of the biggest companies in the entire world, Amazon.com Inc. (Nasdaq: AMZN).

Check out my short video below to learn more about the SEC freezing Chinese IPOs and Amazon’s disappointing earnings.

I also discuss how the Federal Reserve’s inability to do a damn thing right is driving up the reinflation trade, and which stocks to keep on your radar. 

Be sure to share your thoughts in the comments section below. 

And as always, send any trading questions to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.

WRITTEN BY<br>Jeff Zananiri

Jeff Zananiri

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