Japanese stock fundamentals were superior to US stocks this decade

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Nathan Drake
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by Nathan Drake »

fwellimort wrote: Thu Jan 13, 2022 5:49 pm
3CT_Paddler wrote: Thu Jan 13, 2022 5:18 pm Yes the whole argument about US vs Europe or US vs Japan is really misleading and creates an almost political type of discussion. This discussion shouldn't be about US vs International per se... This is really about how the market is currently assigning value to different types of international stocks (growth tech vs everything else). You can argue that the capitalistic brew found in the US is a big part of that and could lead to persistence, but you could just as easily argue that the market is just a little too rosy on tech growth in general and International will outperform if earnings start to disappoint for tech growth.
This is honestly the only reason I really wish regulations made investing in China easier. Tencent and Alibaba are crown jewels of China raking massive piles of cash. And those companies are now doing buybacks on their own shares after such price plummet over political fears.
The P/E of Chinese tech giants are absurd for the type of businesses they do inside China.
Unfortunate that the biggest issue with investing in these two companies is the CCP itself ("common prosperity" == forced donations) along with US govt (another 'executive order' to sell at the bottom).

I am not so bullish on countries like Japan but will be fascinating to watch how tech stocks play out in China in the next decade.

For those that don't know, Tencent owns a piece of everything nowadays (globally).
Tencent owns Riot Games (company that makes League of Legends) and has shares in all kinds of companies like Roblox, Tesla, Epic Games, Supercell, Sea Limited, Netmarble, Kakao, Blizzard, Discord, Ubisoft, etc.. And it owns WeChat, the messenger of China.
And even with the recent political turmoil, Tencent stock in the past decade returned a 31% CAVG. This was after the huge drop last year too.
Imagine if the China-US tension fear didn't exist. Tencent stock would have had a much higher CAVG the past decade even with Xi's forced 'common prosperity' policy.

Then we check the behavior of young kids nowadays and they are all at TikTok. TikTok is also a Chinese company. Yet, Facebook is valued at almost a trillion dollar market cap while ByteDance is valued at only $140 billion (and probably much less after the recent US-China tension).
Nathan Drake wrote: Thu Jan 13, 2022 1:06 pm Banning investment seems unfathomable to me and completely against the free market nature of the west.
US has executive orders from owning certain Chinese stocks already. US investors were literally forced to sell at the bottom only to see the share price go up afterwards (but none of the US investors were able to benefit from this). It only benefited non-US investors who invested after the executive orders.
I think US realizes China is rising and does not want its own country's investors in investing in China. Goes completely against the free market nature of the West but national interest is always first end of day.
To be quite frank, I wouldn't be surprised if companies like Alibaba delisted in NYSE 2 years later and the moment the stock price hits rock bottom, everyone else globally (Canadians, etc.) all start to put massive buy orders for those same shares.
Some companies getting delisted doesn’t mean an entire country will
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km91
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by km91 »

fwellimort wrote: Thu Jan 13, 2022 5:49 pm
3CT_Paddler wrote: Thu Jan 13, 2022 5:18 pm Yes the whole argument about US vs Europe or US vs Japan is really misleading and creates an almost political type of discussion. This discussion shouldn't be about US vs International per se... This is really about how the market is currently assigning value to different types of international stocks (growth tech vs everything else). You can argue that the capitalistic brew found in the US is a big part of that and could lead to persistence, but you could just as easily argue that the market is just a little too rosy on tech growth in general and International will outperform if earnings start to disappoint for tech growth.
This is honestly the only reason I really wish regulations made investing in China easier. Tencent and Alibaba are crown jewels of China raking massive piles of cash. And those companies are now doing buybacks on their own shares after such price plummet over political fears.
The P/E of Chinese tech giants are absurd for the type of businesses they do inside China.
Unfortunate that the biggest issue with investing in these two companies is the CCP itself ("common prosperity" == forced donations) along with US govt (another 'executive order' to sell at the bottom).

I am not so bullish on countries like Japan but will be fascinating to watch how tech stocks play out in China in the next decade.

For those that don't know, Tencent owns a piece of everything nowadays (globally).
Tencent owns Riot Games (company that makes League of Legends) and has shares in all kinds of companies like Roblox, Tesla, Epic Games, Supercell, Sea Limited, Netmarble, Kakao, Blizzard, Discord, Ubisoft, etc.. And it owns WeChat, the messenger of China.
And even with the recent political turmoil, Tencent stock in the past decade returned a 31% CAVG. This was after the huge drop last year too.
Imagine if the China-US tension fear didn't exist. Tencent stock would have had a much higher CAVG the past decade even with Xi's forced 'common prosperity' policy.

Then we check the behavior of young kids nowadays and they are all at TikTok. TikTok is also a Chinese company. Yet, Facebook is valued at almost a trillion dollar market cap while ByteDance is valued at only $140 billion (and probably much less after the recent US-China tension).
Nathan Drake wrote: Thu Jan 13, 2022 1:06 pm Banning investment seems unfathomable to me and completely against the free market nature of the west.
US has executive orders from owning certain Chinese stocks already. US investors were literally forced to sell at the bottom only to see the share price go up afterwards (but none of the US investors were able to benefit from this). It only benefited non-US investors who invested after the executive orders.
I think US realizes China is rising and does not want its own country's investors in investing in China. Goes completely against the free market nature of the West but national interest is always first end of day.
To be quite frank, I wouldn't be surprised if companies like Alibaba delisted in NYSE 2 years later and the moment the stock price hits rock bottom, everyone else globally (Canadians, etc.) all start to put massive buy orders for those same shares.
My bigger concern with investing in Chinese companies is what does "ownership" of these stocks really entitle the holder to. With US listed Chinese companies you own an ADR in a Cayman Island holdco that has on operating agreement with the mainland China company. You're three steps removed from the actual operating economics of the company. Does buying one of these ADRs really represent a claim on the operating company's earnings and does Chinese law allow a stockholder to enforce that claim?
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by fwellimort »

km91 wrote: Thu Jan 13, 2022 6:29 pm My bigger concern with investing in Chinese companies is what does "ownership" of these stocks really entitle the holder to. With US listed Chinese companies you own an ADR in a Cayman Island holdco that has on operating agreement with the mainland China company. You're three steps removed from the actual operating economics of the company. Does buying one of these ADRs really represent a claim on the operating company's earnings and does Chinese law allow a stockholder to enforce that claim?
ADRs only have access to the profits. No control at all.

Considering Chinese tech shares in China are also all VIE structure, unless you expect Chinese stock exchange to disappear, I would say you do have a claim on the operating company's earnings (companies like Tencent returns dividend on those shares).
Also, China end of last month officially recognized the VIE structure for investing.
https://www.nasdaq.com/articles/china-s ... t-overseas
So in the eyes of China's govt, VIE structure is a valid way of investing (something everyone has been questioning for a decade now).

Also, Chinese tech giants are doing buybacks on their VIE shares in the order of billions recently (due to share prices becoming heavily deflated from recent geopolitical issues). It sounds stupid all those Chinese tech giants are wasting tens of billions of dollars on something China won't even recognize in the near future.
As of control though, that's completely different. ADR shares have 0 control. Only earnings.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by km91 »

fwellimort wrote: Thu Jan 13, 2022 6:34 pm
km91 wrote: Thu Jan 13, 2022 6:29 pm My bigger concern with investing in Chinese companies is what does "ownership" of these stocks really entitle the holder to. With US listed Chinese companies you own an ADR in a Cayman Island holdco that has on operating agreement with the mainland China company. You're three steps removed from the actual operating economics of the company. Does buying one of these ADRs really represent a claim on the operating company's earnings and does Chinese law allow a stockholder to enforce that claim?
ADRs only have access to the profits. No control at all.

Considering Chinese tech shares in China are also all VIE structure, unless you expect Chinese stock exchange to disappear, I would say you do have a claim on the operating company's earnings (companies like Tencent returns dividend on those shares).
Also, China end of last month officially recognized the VIE structure for investing.
https://www.nasdaq.com/articles/china-s ... t-overseas
So in the eyes of China's govt, VIE structure is a valid way of investing (something everyone has been questioning for a decade now).

Also, Chinese tech giants are doing buybacks on their VIE shares in the order of billions recently (due to share prices becoming heavily deflated from recent geopolitical issues). It sounds stupid all those Chinese tech giants are wasting tens of billions of dollars on something China won't even recognize in the near future.
As of control though, that's completely different. ADR shares have 0 control. Only earnings.
I'm not so concerned about the VIE structure in and of itself. It seems unlikely the Chinese government will invalidate the structure at this point. The legal claim that stock ownership is supposed to confer is a bit more uncertain though. What mechanism allows the ADR holders to enforce the agreement between the operating company and the holding company? What happens if the operating company decides to not follow the terms of the profit share agreement with the VIE, either for its own reasons or because of a directive from the government? What if the operating company is liquidated or is acquired? Is there a legal mechanism that can be enforced to make sure those proceeds flow to the ADR holders? There is also the risk that the Chinese government decides that it's entitled to some of those earnings as well. We have that in the US too, it's called taxes. But the government's power to exercise that authority is a bit more thorough and unquestioned in China and the reasons for exercising that power are not as transparent, especially to a non-Chinese speaker in the US. Companies like BABA and Tencent are definitely cheap on any number of valuation metrics, but there's also a reason they're cheap.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by fwellimort »

km91 wrote: Thu Jan 13, 2022 7:08 pm I'm not so concerned about the VIE structure in and of itself. It seems unlikely the Chinese government will invalidate the structure at this point. The legal claim that stock ownership is supposed to infer is a bit more uncertain though. What mechanism allows the ADR holders to enforce the agreement between the operating company and the holding company?
You can convert your ADR shares today in IBKR, Fidelity, Schwab, and a few other brokers to Hong Kong and/or German share for some fee.
Basically, you can convert your ADR to Hong Kong shares if you have zero trust in the ADR at any moment today. I believe there has been a lot of BABA to Hong Kong share conversion last year.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by HomerJ »

km91 wrote: Thu Jan 13, 2022 6:29 pm My bigger concern with investing in Chinese companies is what does "ownership" of these stocks really entitle the holder to. With US listed Chinese companies you own an ADR in a Cayman Island holdco that has on operating agreement with the mainland China company. You're three steps removed from the actual operating economics of the company.
Does buying one of these ADRs really represent a claim on the operating company's earnings
No.
and does Chinese law allow a stockholder to enforce that claim?
No.

Or, at least, one person can snap his fingers and change that law on a whim.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by 3CT_Paddler »

fwellimort wrote: Thu Jan 13, 2022 5:49 pm
3CT_Paddler wrote: Thu Jan 13, 2022 5:18 pm Yes the whole argument about US vs Europe or US vs Japan is really misleading and creates an almost political type of discussion. This discussion shouldn't be about US vs International per se... This is really about how the market is currently assigning value to different types of international stocks (growth tech vs everything else). You can argue that the capitalistic brew found in the US is a big part of that and could lead to persistence, but you could just as easily argue that the market is just a little too rosy on tech growth in general and International will outperform if earnings start to disappoint for tech growth.
This is honestly the only reason I really wish regulations made investing in China easier. Tencent and Alibaba are crown jewels of China raking massive piles of cash. And those companies are now doing buybacks on their own shares after such price plummet over political fears.
The P/E of Chinese tech giants are absurd for the type of businesses they do inside China.
Unfortunate that the biggest issue with investing in these two companies is the CCP itself ("common prosperity" == forced donations) along with US govt (another 'executive order' to sell at the bottom).

I am not so bullish on countries like Japan but will be fascinating to watch how tech stocks play out in China in the next decade.

For those that don't know, Tencent owns a piece of everything nowadays (globally).
Tencent owns Riot Games (company that makes League of Legends) and has shares in all kinds of companies like Roblox, Tesla, Epic Games, Supercell, Sea Limited, Netmarble, Kakao, Blizzard, Discord, Ubisoft, etc.. And it owns WeChat, the messenger of China.
And even with the recent political turmoil, Tencent stock in the past decade returned a 31% CAVG. This was after the huge drop last year too.
Imagine if the China-US tension fear didn't exist. Tencent stock would have had a much higher CAVG the past decade even with Xi's forced 'common prosperity' policy.

Then we check the behavior of young kids nowadays and they are all at TikTok. TikTok is also a Chinese company. Yet, Facebook is valued at almost a trillion dollar market cap while ByteDance is valued at only $140 billion (and probably much less after the recent US-China tension).
Nathan Drake wrote: Thu Jan 13, 2022 1:06 pm Banning investment seems unfathomable to me and completely against the free market nature of the west.
US has executive orders from owning certain Chinese stocks already. US investors were literally forced to sell at the bottom only to see the share price go up afterwards (but none of the US investors were able to benefit from this). It only benefited non-US investors who invested after the executive orders.
I think US realizes China is rising and does not want its own country's investors in investing in China. Goes completely against the free market nature of the West but national interest is always first end of day.
To be quite frank, I wouldn't be surprised if companies like Alibaba delisted in NYSE 2 years later and the moment the stock price hits rock bottom, everyone else globally (Canadians, etc.) all start to put massive buy orders for those same shares.
It’s not the “regulators” that are keeping the world from investing in China. It is the CCP. Individual citizens have no rights in their own country, how many rights do you think a foreign investor has in China? And I would not trust the published revenue/profitability from Chinese stocks… they are highly suspect. Finally they are in the beginnings of what amounts to our financial/real estate crisis, but they are more highly leveraged than the US ever was.
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Re: Japanese stock fundamentals were superior to US stocks this decade

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nisiprius wrote: Wed Jan 12, 2022 9:05 pmIt explains why GMO calls the fund "GMO-Usonian," while continuing to leave mysterious the question of why Usonian, a "Japan equity manager," called itself "Usonian."
I found it! "Usonian’s name was inspired by American architect Frank Lloyd Wright, who referenced Japanese culture as one of his primary influences. Wright was based in Chicago, yet some of his most important work was in Japan. Wright’s Usonian style of architecture reflected his philosophy that building owners should play an integral role in the design and development of their building, and not outsource everything to their architect. This philosophy closely parallels Usonian Investments’ view regarding the role investors should play as they engage with the companies in which they invest." Source: https://web.archive.org/web/20200806123 ... f-usonian/

Seems to me they're really stretching to justify using the word Usonian, though to be fair, it is a cool word.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by km91 »

fwellimort wrote: Thu Jan 13, 2022 7:11 pm
km91 wrote: Thu Jan 13, 2022 7:08 pm I'm not so concerned about the VIE structure in and of itself. It seems unlikely the Chinese government will invalidate the structure at this point. The legal claim that stock ownership is supposed to infer is a bit more uncertain though. What mechanism allows the ADR holders to enforce the agreement between the operating company and the holding company?
You can convert your ADR shares today in IBKR, Fidelity, Schwab, and a few other brokers to Hong Kong and/or German share for some fee.
Basically, you can convert your ADR to Hong Kong shares if you have zero trust in the ADR at any moment today. I believe there has been a lot of BABA to Hong Kong share conversion last year.
What happens when the mainland China institutions and families that own the majority of these companies decide to hose down the ADR holders who are minority owners? What legal claim do the ADR holders have against the majority owners and how likely is it that the Chinese government will allow that claim to be recognized by the Chinese legal system?
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by fwellimort »

km91 wrote: Thu Jan 13, 2022 9:19 pm What happens when the mainland China institutions and families that own the majority of these companies decide to hose down the ADR holders who are minority owners? What legal claim do the ADR holders have against the majority owners and how likely is it that the Chinese government will allow that claim to be recognized by the Chinese legal system?
More or less all Chinese tech stocks in China do not have control over the company. They are all VIE structure oriented. There's no voting power with Chinese tech stocks for anyone (it doesn't matter if the investors are from mainland). This is similar to some stocks today in the US Market (and stocks in Europe too).
The one in control is the CCP. CCP is the only one that has voting power (and the company can do whatever as long as it does not anger the CCP).

Hong Kong, Shanghai, Beijing, German, US shares are all VIE shares in many of Chinese tech stocks. There is only rights to the profits. That's it.

Now, this also shows why the valuation is so low. Because the biggest risk is the CCP and most investors outside China don't trust the CCP.
Basically, in the rule of China, Xi (the CCP) is the sole owner of all the companies.

Replace CCP with US Govt and Xi with US President (executive order). And it honestly looks the same.
I know "common prosperity" is a fine that is questionable at best but in terms of fines, US companies get fined far more. But for some reason, US stocks just shrug off those bigger fines as if it is nothing. If anything, the share price often increases after a big fine.

That said, as an American citizen, I do tilt heavily to US. However, I find the bias illogical. How come US tech giants don't trade at a huge discount due to the possibility of becoming monopolies. How come US tech giants get rewarded while Chinese tech giants get punished in the stock market for the same results? It's really something I don't understand.
Last edited by fwellimort on Thu Jan 13, 2022 9:57 pm, edited 8 times in total.
gougou
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by gougou »

km91 wrote: Thu Jan 13, 2022 9:19 pm
fwellimort wrote: Thu Jan 13, 2022 7:11 pm
km91 wrote: Thu Jan 13, 2022 7:08 pm I'm not so concerned about the VIE structure in and of itself. It seems unlikely the Chinese government will invalidate the structure at this point. The legal claim that stock ownership is supposed to infer is a bit more uncertain though. What mechanism allows the ADR holders to enforce the agreement between the operating company and the holding company?
You can convert your ADR shares today in IBKR, Fidelity, Schwab, and a few other brokers to Hong Kong and/or German share for some fee.
Basically, you can convert your ADR to Hong Kong shares if you have zero trust in the ADR at any moment today. I believe there has been a lot of BABA to Hong Kong share conversion last year.
What happens when the mainland China institutions and families that own the majority of these companies decide to hose down the ADR holders who are minority owners? What legal claim do the ADR holders have against the majority owners and how likely is it that the Chinese government will allow that claim to be recognized by the Chinese legal system?
How is the VIE structure different from A/B shares in the US where the public shareholders have no vote? There are many US companies that issue shares with no voting power or very little voting power such as FB, F etc. How do you prevent mismanagement by such US companies?

Whenever we get into ex-US investing it seems that people start to focus on some very technical and immaterial risks and conclude that US is the best.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by km91 »

gougou wrote: Thu Jan 13, 2022 9:46 pm
km91 wrote: Thu Jan 13, 2022 9:19 pm
fwellimort wrote: Thu Jan 13, 2022 7:11 pm
km91 wrote: Thu Jan 13, 2022 7:08 pm I'm not so concerned about the VIE structure in and of itself. It seems unlikely the Chinese government will invalidate the structure at this point. The legal claim that stock ownership is supposed to infer is a bit more uncertain though. What mechanism allows the ADR holders to enforce the agreement between the operating company and the holding company?
You can convert your ADR shares today in IBKR, Fidelity, Schwab, and a few other brokers to Hong Kong and/or German share for some fee.
Basically, you can convert your ADR to Hong Kong shares if you have zero trust in the ADR at any moment today. I believe there has been a lot of BABA to Hong Kong share conversion last year.
What happens when the mainland China institutions and families that own the majority of these companies decide to hose down the ADR holders who are minority owners? What legal claim do the ADR holders have against the majority owners and how likely is it that the Chinese government will allow that claim to be recognized by the Chinese legal system?
Whenever we get into ex-US investing it seems that people start to focus on some very technical and immaterial risks and conclude that US is the best.
Because we take for granted a functional rule of law and property rights. We all know investing in EM is riskier than developed markets and this is one of the reasons why. It's also risk that is especially pronounced when investing in China.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by km91 »

fwellimort wrote: Thu Jan 13, 2022 9:42 pm
km91 wrote: Thu Jan 13, 2022 9:19 pm What happens when the mainland China institutions and families that own the majority of these companies decide to hose down the ADR holders who are minority owners? What legal claim do the ADR holders have against the majority owners and how likely is it that the Chinese government will allow that claim to be recognized by the Chinese legal system?
More or less all Chinese tech stocks in China do not have control over the company.
WHAT??? The owners of the company have no control over it??? And that isn't a huge risk???
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by gougou »

km91 wrote: Thu Jan 13, 2022 9:59 pm
gougou wrote: Thu Jan 13, 2022 9:46 pm
km91 wrote: Thu Jan 13, 2022 9:19 pm
fwellimort wrote: Thu Jan 13, 2022 7:11 pm
km91 wrote: Thu Jan 13, 2022 7:08 pm I'm not so concerned about the VIE structure in and of itself. It seems unlikely the Chinese government will invalidate the structure at this point. The legal claim that stock ownership is supposed to infer is a bit more uncertain though. What mechanism allows the ADR holders to enforce the agreement between the operating company and the holding company?
You can convert your ADR shares today in IBKR, Fidelity, Schwab, and a few other brokers to Hong Kong and/or German share for some fee.
Basically, you can convert your ADR to Hong Kong shares if you have zero trust in the ADR at any moment today. I believe there has been a lot of BABA to Hong Kong share conversion last year.
What happens when the mainland China institutions and families that own the majority of these companies decide to hose down the ADR holders who are minority owners? What legal claim do the ADR holders have against the majority owners and how likely is it that the Chinese government will allow that claim to be recognized by the Chinese legal system?
Whenever we get into ex-US investing it seems that people start to focus on some very technical and immaterial risks and conclude that US is the best.
Because we take for granted a functional rule of law and property rights. We all know investing in EM is riskier than developed markets and this is one of the reasons why. It's also risk that is especially pronounced when investing in China.
So it’s not about VIE then? What’s the difference when you buy an overvalued US tech company which is controlled by the founder through super-voting shares, which never pays dividend or does buyback? Do you exclude all these US companies from your investing universe?

And the rule of law is something that’s impossible to measure. I don’t see Chinese companies losing money because they have weaker “rule of law”? So what exactly is the risk in rule of law?

P.S. A VIE such as BABA might even be better than some US tech companies controlled by super-voting stocks. BABA shares actually give you equal voting right to the Cayman Islands holding company. The holding company also issues a lot of senior notes and the bond holders don’t seem to be afraid of the VIE structure.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by HomerJ »

fwellimort wrote: Thu Jan 13, 2022 9:42 pm
km91 wrote: Thu Jan 13, 2022 9:19 pm What happens when the mainland China institutions and families that own the majority of these companies decide to hose down the ADR holders who are minority owners? What legal claim do the ADR holders have against the majority owners and how likely is it that the Chinese government will allow that claim to be recognized by the Chinese legal system?
More or less all Chinese tech stocks in China do not have control over the company. They are all VIE structure oriented. There's no voting power with Chinese tech stocks for anyone (it doesn't matter if the investors are from mainland). This is similar to some stocks today in the US Market (and stocks in Europe too).
The one in control is the CCP. CCP is the only one that has voting power (and the company can do whatever as long as it does not anger the CCP).

Hong Kong, Shanghai, Beijing, German, US shares are all VIE shares in many of Chinese tech stocks. There is only rights to the profits. That's it.

Now, this also shows why the valuation is so low. Because the biggest risk is the CCP and most investors outside China don't trust the CCP.
Basically, in the rule of China, Xi (the CCP) is the sole owner of all the companies.

Replace CCP with US Govt and Xi with US President (executive order). And it honestly looks the same.
I know "common prosperity" is a fine that is questionable at best but in terms of fines, US companies get fined far more. But for some reason, US stocks just shrug off those bigger fines as if it is nothing. If anything, the share price often increases after a big fine.

That said, as an American citizen, I do tilt heavily to US. However, I find the bias illogical. How come US tech giants don't trade at a huge discount due to the possibility of becoming monopolies. How come US tech giants get rewarded while Chinese tech giants get punished in the stock market for the same results? It's really something I don't understand.
Because you can sue, and win in the U.S.

Look at the cases right now in the Supreme Court that have over-turned executive orders.

Property law is real in the U.S.

If Xi says you get nothing, there is no appeal.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by HomerJ »

gougou wrote: Thu Jan 13, 2022 10:16 pm And the rule of law is something that’s impossible to measure.
This is incorrect.
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by fwellimort »

km91 wrote: Thu Jan 13, 2022 10:08 pm WHAT??? The owners of the company have no control over it??? And that isn't a huge risk???
Owners do have control over it. Just that at end of day, CCP is above all.
Look what happened to Jack Ma (and Alibaba share price) after Jack Ma spoke out claiming China's traditional banking system was outdated in front of CCP head bank owners.
As long as the owners do not anger CCP, the owners do have control. However, unlike the US, in China, money does not get you power. Power does (being in CCP [although if you are high up in CCP, you do have wealth anyways]). That's the biggest difference between US and China.

That said, it feels like you believe these Chinese stocks are all fake.
I would just like to point out Tencent regularly gives dividend and is recently also giving out $16.5 billion worth of JD shares to the Tencent shareholders (directly). So even if you don't trust most Chinese stocks, do understand some Chinese companies are willing to give back their profits to their foreign shareholders.

And almost every Chinese tech companies right now are doing heavy accelerated buybacks and partnerships. Tencent/Alibaba/Tencent Music/JD/Meituan/etc. are spending total in order of tens of billions.
Chinese companies at least believe their VIE shares are legitimate and are willing to put their profits on those shares.

I doubt CCP would let its own companies burn all their cash for no reason. Especially a significant chunk of cash.
And this buyback has only begun since this past year after Chinese tech stocks took a slump due to geopolitics (as the drop had nothing to do with the fundamentals of those firms).

Also, I would like to point out that it is in China's best interest that these tech stocks do well long term.
As China in major cities have become more developed, there are a lot of college graduates heading to tech and finance.
Destroying the value of these tech stocks long term would mean extended massive unemployment which is something China does not want.
Imagine millions of graduates who majored in tech and finance each year unable to find employment because CCP decided to wipe out the stock exchange. It just seems unfathomable.

If anything, CCP is making a clear message from the fines last year. Companies are allowed to grow in China as long as companies are well aware CCP is above all. Jack Ma made a huge mistake last year criticizing CCP worldwide (and in front of the CCP too). Do I agree with this kind of system? Absolutely not. I love the US system more. However, when in Rome, be a Roman.
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LadyGeek
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Re: Japanese stock fundamentals were superior to US stocks this decade

Post by LadyGeek »

This thread has run its course and is locked (no longer discussing Japan, straying into Chinese politics - CCP = Chinese Communist Party). See: Politics and Religion
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