📌 China: a hated market where an interesting opportunity might be emerging?

Lately I've been looking more at sectors and markets where sentiment is weak.

Not where everything is flying up.

Not where everyone chases the same AI or semiconductor story.

But where quality companies trade under pressure, investors avoid them, sentiment is bad, and valuations start to look interesting.

And one of those markets, in my view, is China.

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Chinese stocks have been a very controversial topic for years.

Many investors avoid them altogether.

And honestly, I understand why.

China has a lot of risks:

🔹 political risk

🔹 regulatory interventions

🔹 geopolitical tension

🔹 uncertainty around VIE structures

🔹 a weaker Chinese consumer

🔹 problems in the real estate sector

🔹 low foreign investor confidence

🔹 risk that shareholders won't always come first

This is not a market like the U.S.

For U.S. companies I mainly focus on the business, valuation, cash flow, moat and management.

With China I also have to consider the state, regulations, geopolitics and the rules of the game.

And that's exactly why I would never treat Chinese stocks as a simple or safe investment.

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On the other hand, that's precisely why sentiment there is so poor.

And when sentiment is extremely bad, sometimes an opportunity can arise.

Not automatically.

Not with every company.

But with some quality businesses, yes.

China still has a huge market, hundreds of millions of digital consumers, large tech platforms, e-commerce, online advertising, gaming, payments, cloud, AI and logistics.

Companies like Tencent, Alibaba, JD.com, PDD, Baidu or Meituan are not small insignificant businesses.

They are massive platforms that, in a different geopolitical environment, the market might value very differently.

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The one that interests me the most personally is Tencent.

I view Tencent as one of the highest-quality Chinese internet businesses.

It has WeChat, gaming, advertising, payments, a digital ecosystem and a huge user base.

WeChat is more than just an app in China.

It's a communication platform, payment infrastructure, social network, mini-app ecosystem and a daily tool for hundreds of millions of people.

That's a very strong moat.

If I had to pick one company in China that most resembles a high-quality platform with long-term potential, Tencent would be very high on the list.

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Alibaba is a different story.

On one hand it has e-commerce, cloud, AI, logistics, a large customer base and strong share buybacks.

On the other hand it has years of regulatory pressure behind it, weaker sentiment, competition and questions around growth.

Today Alibaba, in my opinion, looks more like a value/turnaround story.

It's not a clean compounder without problems.

But if sentiment towards China improves and Alibaba can stabilize growth, improve the cloud business and continue buybacks, I think there's potential for re-rating.

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JD.com is interesting mainly because of its logistics.

JD has its own infrastructure, warehouses, delivery and a more controlled retail model.

That's an advantage, but also a disadvantage, because such a business is more capital-intensive and has lower margins than pure platforms.

JD can be cheap.

But cheap doesn't automatically mean good.

Here I'd like to see whether the company can sustainably improve margins, cash flow and return on capital.

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PDD might be the most interesting growth company in this group.

The theme: Pinduoduo—extreme growth, aggressive model, low prices, strong execution.

But at the same time it's a company I have more questions about.

Sustainability of margins.

Transparency.

Regulatory risk.

Relationships with suppliers.

Long-term business quality.

PDD can be a huge winner, but for me it's a riskier bet than Tencent.

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Baidu is more of an AI/search/cloud/autonomous-driving turnaround story.

It has AI assets, search, cloud and Apollo.

But the question is whether it can actually monetize AI and convince the market again that it's not just an old Chinese Google with slower growth.

Baidu can be cheap.

But in my view it needs a clearer catalyst.

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For a retail investor it may be interesting to look at ETFs like KWEB.

Not because it's the ideal solution.

But because with China the risk of individual companies is high.

Regulation, politics, sentiment, accounting, geopolitics — all of this can hit a specific company very hard.

An ETF gives at least broader exposure to the Chinese internet sector.

On the other hand, you also buy companies you might not pick individually.

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My personal point on China is simple.

China can be interesting.

But not as a large core position.

Rather as a smaller contrarian exposure.

Something like:

📌 0.5% to 2% of the portfolio

📌 only if you understand the risks

📌 ideally through the highest-quality names or a broader basket

📌 without the illusion that it's a safe market

📌 with the willingness to endure high volatility

For me China would not replace companies like Microsoft, Alphabet, Meta, Mastercard or S&P Global.

More of a complement.

A smaller bet that extremely poor sentiment will one day improve and quality Chinese platforms will get better valuations.

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What would need to happen?

For Chinese stocks to work, we need several things:

✅ more stable regulations

✅ improvement in investor confidence

✅ a stronger Chinese consumer

✅ a better economic outlook

✅ the return of foreign capital

✅ continuation of buybacks

✅ less geopolitical fear

✅ evidence that the big platforms can still grow

If this succeeds at least partially, re-rating could be attractive.

But if political and economic risks worsen, Chinese stocks can remain cheap for a very long time.

And a cheap stock can be cheap for a good reason.

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That's why I'd approach China very cautiously.

Not in the style of:

"It's cheap, I'm going all-in."

But rather:

"There is bad sentiment, potentially quality platforms, low expectations and big risks. Maybe it makes sense as a small contrarian position."

I think that's a healthier approach.

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If I had to make a personal watchlist of Chinese stocks, it would look roughly like this:

🔹 Tencent – the highest-quality platform in my view

🔹 Alibaba – value/turnaround + buybacks

🔹 JD.com – logistics and e-commerce, but lower margins

🔹 PDD – biggest growth, but also more questions

🔹 Baidu – AI/search/cloud turnaround

🔹 KWEB – broader exposure to the Chinese internet

Of these, I would personally watch Tencent and Alibaba the most.

Tencent for quality.

Alibaba for valuation and potential re-rating.

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My final thought:

China is not popular today.

And that's exactly why it makes sense to at least keep an eye on it.

Not because a generational opportunity is definitely forming there.

But because markets often offer the best opportunities where sentiment is bad, expectations are low and most investors are scared.

You just need to distinguish between bad sentiment around a good business and bad sentiment around a broken business.

And for China this distinction is even more important than for U.S. stocks.

This is not investment advice. It's just my personal view on Chinese stocks and why I'm currently watching them.