Massive Market Shift: Why Chinese Tech Stocks Explode Next | Shaun Rein

Ralph Lauren

Across the shows: 2 speakers in other episodes, 2 bullish and 0 bearish calls, past 30 days

• Shaun Rein · China Market Research Group (CMR)Bullish

  Ralph Lauren's China sales are strong, so its stock looks undervalued despite a sell-off.

  Shaun says the stocks of consumer names like Ralph Lauren and Adidas are down even though their numbers are strong. Ralph Lauren's China sales rose 50% in the last quarter. He presents these defensive consumer plays as one of two areas institutional investors are rotating into away from US AI.

  “Maybe the consumer plays like a Ralph Lauren, like an Adidas where the stocks are down, but the numbers are actually pretty good for those companies, especially in a market like China where Ralph Lauren sales have gone up 50% in the last quarter”at 2:48

adidas

• Shaun Rein · China Market Research Group (CMR)Bullish

  Adidas's stock is down despite strong China sales growth, making it a defensive buy.

  Shaun cites Adidas's China sales growing 16 to 20% every quarter for the last three quarters, while the stock has fallen. He groups Adidas with Ralph Lauren as defensive consumer plays that institutional investors are starting to favour as they rotate away from US AI.

  “Adidas has gone up 16 to 20% every quarter for the last three.”at 2:48

Compagnie Financière Richemont SA

• Shaun Rein · China Market Research Group (CMR)Bullish

  Richemont is doing well because wealthy Chinese keep spending on luxury, despite the tax crackdown.

  Shaun argues that a tax crackdown on wealthy Chinese will not hit spending much, since a person worth $5 billion can still write a $100 million check and have billions left. He points to Richemont's brands Cartier and Van Cleef & Arpels selling well and high-end watches selling strongly, as evidence that Chinese high-end spending continues.

  “you still have billions of dollars to go out and spend. And that's why the Richemont are doing well, you know, Cartier, Van Cleef and Arpel are selling very well”at 28:48

ChangXin Memory Technologies

• Shaun Rein · China Market Research Group (CMR)Bullish

  China will buy only domestic memory chips, so CXMT's output is captive demand regardless of quality gaps.

  Rein argues that because the US and Biden/Trump-era tech restrictions have weaponized technology, China will move as fast as possible to de-risk from foreign suppliers through indigenous innovation. He says the quality gap versus SK Hynix, Samsung, Nvidia or ASML does not matter, because China will only buy Chinese chips. He says CXMT is already at capacity, and that output is going to Chinese companies and some other customers in the global majority, which supports demand for CXMT.

  “So that's why to me, the question of quality and innovation doesn't matter, the Chinese will only buy the Chinese. And the reality is that CXMT ... they're at capacity right now and that capacity is going into Chinese companies”at 50:55

SK Hynix

Across the shows: 8 speakers in other episodes, 4 bullish and 2 bearish calls, past 30 days

• Shaun Rein · China Market Research Group (CMR)Bullish

  SK Hynix is safe from Chinese memory competition, as Western buyers won't trust Chinese chips in supply chains.

  Rein says he is not worried about SK Hynix being overtaken by Chinese rival CXMT. He expects Americans and Europeans will never trust Chinese components in their supply chains, so they will keep buying from South Korean suppliers. He cites South Korea's close military alliance with the US as the reason. He also says China cannot catch SK Hynix soon, and that a Chinese export threat to third markets like Malaysia, Indonesia or Saudi Arabia is possible only in the longer term.

  “So I am not worried about SK hynix, ... they're gonna keep buying from the South Koreans because the South Koreans are very close allies militarily with the Americans.”at 51:17

Samsung Electronics Co.

Across the shows: 2 speakers in other episodes, 2 bullish and 0 bearish calls, past 30 days

• Shaun Rein · China Market Research Group (CMR)Bullish

  Samsung is not threatened by Chinese chipmakers soon; the risk to it is roughly five years out.

  Rein says Chinese chipmakers will not overtake Samsung anytime soon. He says that once China builds up capacity, perhaps about five years from now, it could export memory chips into markets such as Malaysia, Indonesia and Saudi Arabia and displace Samsung there. He calls that possible but not a near-term risk, and expects Western buyers to keep sourcing from South Korea.

  “I'm not worried about Samsung from Chinese overtaking them anytime soon. ... maybe five years from now when the Chinese build up their capacity ... That's possible, but not in the short term.”at 51:19

China's economy

• Shaun Rein · China Market Research Group (CMR)

  Without Western Europe export markets, China's economy will stagnate within one or two years.

  Shaun says China has increased exports to Southeast Asia, the Middle East and Africa. But Europe as a bloc is about $20 trillion a year in economic size, and China needs Western European markets for its semiconductors, technology, shoes and clothing. He argues that tariffs make it hard for China to export to the West at good margins, and that without new export markets its economy will stagnate in one or two years. This is why he thinks China wants good trade relations with Germany and France, and so wants the Ukraine war to end.

  “they've increased their exports to Southeast Asia and to Middle East and to Africa, but at the end of the day, they still need the export markets into Western Europe. Otherwise China's economy will stagnate in one or two years if they can't open up new markets.”at 23:36

• Shaun Rein · China Market Research Group (CMR)

  Local governments are broke, so Beijing is squeezing the wealthy for back taxes, which hit equities.

  Shaun argues China's profits have been weak since the 2022 lockdowns, which cut tax revenue. Local governments have run out of money, with some cities halting public bus service because they cannot pay drivers. Beijing has told wealthy Chinese to pay back taxes on overseas trusts, and many had to sell shares in companies they control to pay. He says this selling is a main reason for the recent equity sell-off, though he expects it to ease now that the tax has been paid.

  “Over the last four years, there hasn't been that much profits in China... and you see a lot of local governments have run out of money.”at 29:41

• Shaun Rein · China Market Research Group (CMR)

  Strong Q3 GDP reflects exporters, while domestic retail demand stays weak.

  Shaun reconciles Q3 GDP of 4.5% with weak domestic demand. He says exporters are doing very well, with China's trade [surplus] with the rest of the world around $1.2 trillion. Restaurants say business is terrible, yet they are still growing 2 to 10%, which feels slow compared with the 50 to 200% annual growth of the 2000s and 2010s. He concludes that headline GDP is propped up by exports while the domestic consumer is hurting.

  “the exporters especially are doing very well right now. You're seeing a 1,000,000,000,000, 1,200,000,000,000 trade [surplus] with the rest of the world.”at 33:58

• Shaun Rein · China Market Research Group (CMR)

  China's real GDP growth of 4 to 5% is realistic, though far slower than past decades.

  Shaun says he believes 4 to 5% GDP growth is realistic and not a made-up number. Business clients now see only 2 to 10% growth, against 50 to 200% annual growth before 2017. He says this slowdown is much weaker than the rapid wealth creation of the past, when people could triple or quadruple their net worth each year.

  “I do believe four or 5% GDP is actually realistic. I don't think it's a completely made up number but it seems really, really slow”at 35:43

• Shaun Rein · China Market Research Group (CMR)

  Falling property prices leave wealthy Chinese preserving capital rather than spending.

  Shaun says the wealth created by real estate was a one-time event. Many people who built apartment portfolios saw property prices rise sharply, but prices have since fallen 30 to 50%. Their net worth is still positive but reduced, so they are preserving capital instead of spending. He contrasts this with US billionaires, whose wealth keeps rising through their core company stakes.

  “Now these prices have dropped 30 to 50%, so now they're still worth... but they don't feel happy and this was clearly a one time off wealth creation event. So they're not going out and spending right now, they're preserving.”at 37:20

• Shaun Rein · China Market Research Group (CMR)

  China's property market will never again grow as it did 25 years ago; real estate wealth was a one-time boom.

  Rein argues that much of China's wealth creation came from real estate, and that this was a one-time affair. He says the market went from a very low base to a very high one, which has never happened in world history. He concludes that China's real estate will not grow as it did a quarter-century ago, so wealth tied to property will not compound the same way.

  “You're never gonna see the real estate markets ... grow like they did twenty five years ago in China. It's impossible”at 37:57

• Shaun Rein · China Market Research Group (CMR)

  Chinese capital controls keep wealthy investors from moving money abroad, blocking capital flight.

  Rein says wealthy Chinese want to invest abroad as the domestic market weakens, but strict capital controls make it hard to get money out. He describes a businessman who is allowed to remit $50,000 per person per year overseas and who gets his network of friends and relatives to each send the quota so he can invest abroad. He notes that the government has cracked down on capital outflows, and that Chinese buying Bitcoin was previously one way around them.

  “The problem is it big capital controls. It's hard for them to get money out.”at 38:44

• Shaun Rein · China Market Research Group (CMR)

  Looser monetary policy won't revive China because households hoard savings and no one wants to borrow.

  Rein says Chinese households hold about $20 trillion in savings. They are not buying real estate and are wary of equities, so they put money into insurance products and time deposits earning about 1% despite deflation of 2–3%. State banks have cash and want to lend, but borrowers are not willing to take loans, because no one sees good places to deploy the money. He concludes that cutting rates or loosening policy is not a workable stimulus strategy, and that this is why Chinese bond yields are at record lows: nobody wants the bonds.

  “The state owned banks are trying to loan money out, but the reality is nobody's willing to borrow money. And that's why like interest rates and a loosening monetary policy is not the strategy”at 43:49

US–China AI & chip race

• Shaun Rein · China Market Research Group (CMR)

  Global South countries like Malaysia are using both Nvidia and Chinese chips, playing the two powers off each other.

  Shaun says Google's $15 billion investment in Malaysia shows countries will use Chinese AI and semiconductors. Malaysia is one of the few countries still using Nvidia chips, but it also uses Huawei and other Chinese chips. He argues that global South countries are starting to play America and China off each other by buying chips from both.

  “Malaysia is one of the few countries that is still using Nvidia chips, but they're also using Huawei and other Chinese chips. So what you're starting to see is global South countries like a Malaysia are starting to play America and China off each other”at 5:30

• Shaun Rein · China Market Research Group (CMR)

  Shenzhen has likely surpassed Silicon Valley as a hub, combining software and hardware innovation.

  Shaun argues Shenzhen has probably surpassed Silicon Valley in many ways. Silicon Valley is strong in software, but Shenzhen has both software and hardware, with Tencent, Huawei and DJI all headquartered there. He describes the city's reinvention from manufacturing to deep tech as an unparalleled ecosystem, and he says Americans will be surprised at how far ahead Shenzhen is.

  “they've probably in many ways surpassed Silicon Valley. Silicon Valley is great when it comes to software, but Shenzhen has software as well as hardware.”at 17:41

Tariffs & trade policy

• Shaun Rein · China Market Research Group (CMR)

  Trump and Biden's China tariffs drove US inflation and China's deflation over the past decade.

  Shaun argues that China has faced a deflationary cycle for ten years while America has faced an inflationary one, and that both trace back to the trade war Trump started and Biden continued. He links tariffs to US affordability problems such as a $48,000 average car, restaurant food prices up 50% in five years, and weak results at Walmart and McDonald's. He expects the Democrats to rein in tariffs, especially on Canada, India and Vietnam, because voters chose a more affordable America.

  “that's tariffs, right? China has been facing a deflationary cycle for the last ten years. America has been facing an inflationary cycle for the last ten years and it all stems from first Trump and then Biden's trade war against China.”at 8:01

• Shaun Rein · China Market Research Group (CMR)

  Ending the US-China trade war would immediately cut US inflation by letting Chinese cars and goods be exported.

  Rein argues that US households are being squeezed by inflation and that affordability cost the Trump administration voters. He says the best fix is to end the trade war and restore US-China cooperation, which would immediately reduce US inflation if Chinese firms such as BYD, Xiaomi and NIO could export to the US. He calls tariffs basic economics that should have been learned from Smoot-Hawley, and says they are hurting both economies.

  “and the best way to solve this is to have an end of the trade war and have The United States and China work together again. That would put an immediate end to the inflation in The US”at 46:57

AI bubble & tech valuations

• Shaun Rein · China Market Research Group (CMR)

  US AI stock prices got too frothy, pushing money out of the US; the AI story still holds long term.

  Shaun reports that the large US and Australian funds he met since August and September were worried that AI prices in the US had become too frothy, so they began looking for new places to allocate. He says this is pushing investors to rotate out of US AI and tech. He is not convinced of the American AI story in the short term because of the frothiness, but he still thinks the long-term AI story stands. He ties this rotation to the fear that Democrats will crack down on Silicon Valley after the midterms.

  “they were worried that prices in AI had gotten too frothy in The United States. And so at that point, they were starting to look for new places to allocate their money.”at 2:48

International equities

• Shaun Rein · China Market Research Group (CMR)

  Chinese equities are undervalued versus the Nasdaq and near bottom; foreign investors will return in coming months.

  Shaun argues Chinese tech and AI stocks are undervalued relative to the US Nasdaq even after the Nasdaq's drop. The Star 50 index fell about 40% from its summer high, and he says Chinese AI names such as Cambricon, MiniMax and ChangXin Memory are where investors will move. He thinks Chinese equities have hit bottom and foreign investors will gain exposure to China and Hong Kong in the coming months. The sell-off reflects fears about China's geopolitics, whether profits are sustainable, and whether other countries will buy Chinese AI and chips. He expects high volatility, so he advises sizing exposure small and buying dips, and he still sees the US AI story as intact long term.

  “we've already hit, I think, rock bottom in Chinese equities. It's now time to start looking here because the foreign investors are gonna gain exposure to China and Hong Kong in the coming months.”at 3:51

Antitrust & tech regulation

• Shaun Rein · China Market Research Group (CMR)

  Democrats may target Zuckerberg, Huang and Musk, which could hit US equities hard.

  Shaun argues that after the midterms Democrats may go after tech tycoons who cozied up to Trump, such as Zuckerberg, Jensen Huang and Musk, and that Jeffries and Schumer have signalled this. He notes that US equities fell sharply two days after the midterm results. He uses this as a reason foreign investors may shift toward Chinese stocks. He calls the Chinese bet high risk, suggesting limiting exposure.

  “the Democrats are saying, get ready, lawyer up, we're gonna go after Trump, we're gonna go after Mark Zuckerberg, we're gonna go after Jen Zhen Huang, we're gonna go after Elon Musk”at 5:55

US consumer

• Shaun Rein · China Market Research Group (CMR)

  American consumers are squeezed by unaffordable prices and high gas costs, hurting retailers like Walmart and McDonald's.

  Shaun cites an average car price of about $48,000, restaurant food prices up 50% over five years, and gas at $6. He says Walmart and McDonald's are reporting weak numbers because American consumers cannot afford to buy. He attributes this to the Iran war, which pushed gas prices up over the last six or seven months, and to tariffs.

  “America's facing massive inflationary issues, gas is up at $6 and you're even seeing companies like Walmart and McDonald's are reporting bad numbers because they say the American consumer can't buy things.”at 7:35

US–China relations

• Shaun Rein · China Market Research Group (CMR)

  Trump needs a win, so US–China trade relations should improve in the coming months via a grand bargain.

  Shaun expects Trump to visit China later this month for the APEC summit in Shenzhen and to seek a grand bargain with Xi, possibly alongside Putin. He argues Trump needs a win after a poor midterm result and affordability concerns. He thinks China has the upper hand in negotiations and will press for more access to Nvidia Blackwell chips and reduced tariffs, while giving some ground on rare earths. He says Trump might accept lower tariffs because affordability was the main reason Republicans lost the midterms.

  “I'm actually hopeful that economic trade and economic relations with China will get better in the coming months because Trump sorely needs a win.”at 10:27

Middle East & Iran

• Shaun Rein · China Market Research Group (CMR)

  China is running low on oil and its reserves are depleting, so it wants the Iran conflict to end.

  Shaun says China has held off the oil shock better than the rest of the world by cutting oil use by 5.5 million barrels a day, roughly India's daily consumption. But its savings are being depleted. China trades about $35 billion a year with Iran and $105 to $110 billion with the UAE and Saudi Arabia, so the conflict is hurting its trade partners, and China wants an end to it.

  “China is starting to run out of oil. I mean, I think they've held off better than the rest of the world because they've reduced the amount of oil they've used by 5,500,000 barrels a day”at 19:57

Russia & Ukraine

• Shaun Rein · China Market Research Group (CMR)

  China has squeezed out the war's benefits and now wants it to end to restore European trade.

  Shaun argues the Ukraine war has benefited China by keeping the West focused on Russia, and that China has pushed its strategic partnership with Russia. Russia now imports Chinese NEVs, such as BYD, after sanctions removed Western cars. But China has been turned into a boogeyman in Western Europe over its support for Russia. He says China now wants the war to end so it can trade well with Germany and France, which it needs for exports.

  “the Chinese have been able to squeeze out all of the benefits from this war and it's now time for them to wanna end it because they want to be able to have good trade relations with the Germans.”at 22:58