Skepticism toward Chinese and Vietnamese micro-caps
The bear case for Chinese and Vietnamese micro-caps is that foreign investors face severe structural risks, including capital controls, lack of legal recourse, and unfavorable government intervention.
The argument
The guest expressed great skepticism about these markets, citing instances where local governments instructed companies to reduce dividend payments to foreigners. He also warned of variable interest entity (VIE) structures and the risk of adverse selection among US-listed Chinese 'concept stocks'.
The thesis, stress-tested
✓ What validates it
- ✓Tightening of capital controls in China or Vietnam
- ✓Further regulatory actions restricting dividend distributions to foreign shareholders
▸ Risks discussed
- ▸Exceptional large-cap companies like Tencent may perform well despite broad structural headwinds
Hear it yourself
"So I think there's a risk of adverse selection that you get, like, the the maybe worst quality companies listed in The US. So, you know, I I wonder why. Like, what's the reason?"
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