Taking into account a U.S/China trade war that may be on pause, but far from resolved, China stocks could provide traders with an opportune entry point and resume their rally.
Volatility in China equities is certainly not a new phenomenon. This has been the case for the past five years as the country continues to regain its economic footing after suffering a real estate development crisis in 2021 that toppled its economy.
With the tariff wars resuming in 2025, the S&P 500 is getting an idea of how volatile that country’s stocks can be.
“For years, investors dismissed China as uninvestible, citing abrupt policy shifts, weak domestic demand, and geopolitical risk,” Barron’s noted. Barron’s compared the more recent volatility in the S&P 500 to that of China’s Hang Seng index. In a 10-year time frame, the S&P 500 has only seen this level of volatility once before. The Hang Seng Index has seen similar major market fluctuations five more times.
For traders looking for bullish opportunities, this could present a buy-the-dip moment. Long-term investors who stand firm that China can right the proverbial ship can also use the present opportunity for a value-oriented play.
“With MSCI China trading at a 40+% discount to the S&P, China may no longer be the risk—it may be the opportunity,” Barron’s added.
Storm Clouds Just Gathering
U.S. markets recovering from the early April sell-offs may be providing investors with just a momentary sigh of relief. There’s still a lot of market uncertainty to go around with the aforementioned “abrupt policy shifts, weak domestic demand, and geopolitical risk” still circulating in the capital markets.
As mentioned, these uncertainties are nothing new to that country’s equities. They have been weathering the proverbial storm. In the U.S., said storm could be in the early stages. China markets are starting to show early signs of a recovery. The year-to-date start for the Hang Seng Index has been evident of that. There are other signs of recovery as well.
“Entrepreneurs adapted quickly by innovating or implementing efficiencies,” Barron’s added. “Under pressure, resilience wasn’t optional—it was a necessary mode of operation. China is now showing signs of stabilization, especially on the back of the government’s pivot away from austerity measures and toward stimulus policies in late 2024.”
Traders sensing a bullish trajectory should consider the Direxion Daily FTSE China Bull 3X Shares (YINN ). It seeks daily investment results equal to 300% of the performance of the FTSE China 50 Index. This gives traders exposure to the 50 largest and most liquid public China companies currently trading on the Hong Kong Stock Exchange as determined by FTSE/Russell.
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