Chinese stocks, many of them cherished by U.S. investors, have had a terrible year. The sector indicator, the iShares China Large-Cap ETF (NYSEMKT:FXI), is down 11% year to date, far underperforming the S&P 500’s 20% gain for the year. Notable fund managers such as ARK Invest’s Cathie Wood have been aggressively reducing exposure in Chinese stocks as of late, leading to sectorwide cheap valuation.
But investors who buy into Chinese stocks now aren’t getting bargains. Instead, they are purchasing potentially damaged goods that could be detrimental to the health of their wallets. A couple of weeks ago, I went into detail about two big reasons to stay away from Chinese stocks. Since that report, new developments have added even more justification for being cautious.
Let’s look at three more reasons Chinese stocks are deep in the no-go zone.
