- ORIGINAL NEWS
China’s stock valuations are ‘way too low,’ strategist says — here’s why
- SUMMARY
After enduring a four-month stretch of falling prices, China has finally seen a glimmer of inflation in February.
The consumer price index rose by 0.7% compared to the same month last year, suggesting a slight upward trend.
Despite this encouraging sign, Shaun Rein, an expert on China’s economy, cautions that deflation remains a threat.
He points to the modest rebound in the Hang Seng index, which is still down significantly over the past year.
Rein believes that Chinese stocks are severely undervalued and present a cautious investment opportunity.
The Chinese economy has faced challenges in recent years, particularly in the real estate and export sectors.
The government aims for 5% growth in 2024, a modest target but still ambitious given the current economic headwinds.
Rein acknowledges the near-term challenges but emphasizes that China is actively transitioning its economy away from real estate and infrastructure.
This shift, he believes, has long-term growth potential.
India and Vietnam, while promising markets, do not have the scale or potential of China.
While he does not advocate a bullish market outlook, Rein urges investors to consider the low valuations of Chinese stocks.
He has personally begun investing in A-shares listed in Hong Kong, seeing an opportunity to capitalize on the perceived undervaluation.
However, he stresses that cautious optimism is warranted due to lingering concerns about deflation and a weak job market.
Careful consideration and prudent investment decisions are crucial in this evolving economic landscape.
- NEWS SENTIMENT CHECK
- Overall sentiment:
negative
Positive
“Valuations of Chinese stocks are “way too low” and investors should be looking to cautiously re-enter the world’s second-largest economy.”
Negative
“Despite a modest rebound in the last month, Hong Kong’s Hang Seng index is still down more than 14% over the past year, and Rein believes “valuations are way too low.””
“We are still seeing though that Chinese consumers, especially the wealthy ones, are quite nervous — they’re still trading down and skipping big ticket items.”
“”They’re cautious about whether or not the government is going to launch a bazooka-like stimulus — clearly they’re not going to.””
“He suggested that in the short-term, global luxury brands could continue to struggle with a lack of Chinese demand, and that domestic neighborhood electric vehicle (NEV) manufacturers could be in for a tough run.”
“China’s well-documented economic struggles have led to broad declines in its stock markets over the past year, as growth was weighed down by a slump in real estate and exports.”
“But we think China’s low inflation is a symptom of its growth model built on a high rate of investment.”
“”It’s too early to call a bull market, you still have to be very cautious, the economy is still weak – don’t get me wrong — again the D word (deflation) looms over China, there is still a weak job market, but the valuations are too low.””
“Although the near-term headwinds mean the investment landscape remains tricky”