The markets came under heavy selling pressure today, as investors finally began to grapple with the possible effects of genuine trade war, one that included not just China, but many U.S. allies as well. The selling was steady, and finally took a chunk out of the Golden Dragon ETF (PGJ) that tracks Chinese ADRs. While the iShares MSCI EM ETF (PGJ) has been sinking since January, Chinese ADRs had shown much greater relative strength. But today’s selloff of more than 4% dropped PGJ decisively below its 50-day moving average.
Accordingly, we’re making some adjustments to protect the portfolio from further losses by making four moves.
We have two sells tonight. The first sell is our remaining half position in TAL Education (TAL), a position in which we still have a large profit. But the stock is off around 6% today, and there’s no sense in just watching our profit leak away.
The second sell is 58.com (WUBA), which we’ve had on Hold until now. The stock has been drifting lower since early May but dropped an astonishing 10% today and finished the day at the lower end of its range. We will sell and hold the cash.
The other two changes in the portfolio are moving ZTO Express (ZTO) and Alibaba (BABA) to Hold ratings. We still have a good profit in BABA, but it fell a decisive 6% today, and it shouldn’t be bought until it shows signs of finding support. Our half position in ZTO is showing us a small loss, and the stock has been drifting lower since the middle of June. We will keep ZTO on a short leash.
If the market pullback continues, we will do more, but these actions seem appropriate for now as we already have a sizable cash position.