Chinese Equity Market Cheap Or Risky

The Chinese Equity market may be cheap and too risky, but it is difficult to ignore. Especially now as markets show some early returns to growth.

Aug 2022

Equity

China Is Difficult To Ignore

China is rarely off the radar of Institutional Investors, but more recently for reasons that dissuaded new allocations: The regulatory crack-down on tech companies; a zero-covid policy that led to entire cities being shutdown, stiffling growth and supply chain fluidity; and volatile geopolitical tensions in the region. But there seems to be a renewed spark in interest as can be seen in the MSCI China Index, which increased around 20% between May and July.

Based on clicks and search queries on China, Institutional Investors seem to be focused on three things: Firstly, Chinese Government officials sentiment on economic growth; Secondly, how that growth is now being stimulated; And thirdly, how will that growth impact the global economy. Whilst US-China geopolitical risks seem to be on the increase, from an economic perspective, there are signs that Chinese Equity valuations may be on the rise once again.

Or put differently, can you avoid not to take a second look.

China Equity

Why Better Times May Be Ahead For China’s Stock Market

AGF Investments

‍

China stocks are slumping on news of rising COVID-19 cases in the world’s most populous country but that doesn’t negate their strong rebound in recent months. The MSCI China Index has still risen by more than 20% since early-May, according to Bloomberg, when it hit what now appears to be a trough. That is a remarkable recovery, given that the world’s second largest economy has been challenged this year by COVID-19 flare-ups – including one that led to a lockdown of Shanghai, home to the world’s largest seaport, in the spring – as well as continuing global supply chain constrictions and uncertainty around Beijing’s regulatory crackdown on technology stocks. Only a few months ago, those factors led some Western market-watchers to openly wonder if China had become “uninvestable.” So for those investors who rode out the downturn, the recent uptick in China stocks is surely welcome. The question, however, is whether the recovery is sustainable.

Read Paper