China Stocks Are Approaching Bottom, Says Mark Mobius: Time to Buy Small, Mid-Sized Names

The negative risks faced by China stocks may have played out fully and a bottom is near, Mark Mobius, a fund manager focused on emerging markets said in an interview with the South China Morning Post.

What Happened: China stocks could be approaching a "bottom or near bottom" and a rebound is in the cards, the fund manager said. The Chinese government may want to see the domestic market recover, he reasoned.

Mobius recommended companies that would benefit from the regulatory policies in China. He expects the government to throw its weight behind small- and mid-sized companies having low debt and solid earnings, as it strives to create a "more level playing field."

Related Link: China Q1 GDP Defies COVID-19 Impact But March Data Begins To Reflect Softness: What You Need To Know

Why It's Important: U.S.-listed China stocks have been on an extended downtrend since the beginning of 2021. Multiple risks have weighed down on them, with regulatory woes and domestic economic softening the key among the drags.

The resurgence of the COVID-19 pandemic in China has served to exacerbate the already grim scenario.

Big tech companies such as Alibaba Group, Holdings Limited BABA, Tencent Holdings Limited TCEHY have shed a bulk of their market capitalizations, with their shares trading at or near record lows. Regulators have repeatedly pulled up these companies for misusing user data and stifling competition.

Even domestic EV startups such as Nio, Inc. NIO, XPeng, Inc. XPEV and Li Auto, Inc. LI, which are beneficiaries of government policies to curb pollution and accelerate EV adoption, have seen their valuations significantly slump this year.

Related Link: Didi Buckles Under Regulatory Pressure, Opts To Delist From NYSE: What This Means For Investors