Are China tech stocks permanently undervalued or is this just the cycle?

Investor summaryNeutral

The author questions whether the valuation discount of China tech stocks compared to US peers is structural or cyclical.

Bull points

Multiples of China tech stocks are significantly lower than US peers, offering potential upside if the cycle turns.

Bear points

The market may permanently attach a structural risk premium to China, meaning the valuation discount might never close.

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Post body

Been looking at some China tech names and the multiples are still way below US peers. Not a new observation, I know.

But the question I keep coming back to: is the discount structural or cyclical? If it's just the cycle turning, a lot of these names are stupid cheap. If it's structural — meaning the market permanently attaches a risk premium to anything China — then the discount never really closes.

Hard to know which camp to be in. What's your framework for thinking about this?

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