From BNN Bloomberg: 2024-05-13 19:28:41

Chinese stocks have shown a 27% gain since January, but many money managers remain hesitant due to uncertain earnings. Despite rotations from other markets and policy support, doubts linger regarding Chinese companies’ profitability. Current earnings growth projections are considered too high, with actual corporate performance needing to align. The recent rally is attributed to cheap valuations and potential policy support from Beijing.

The MSCI China Index is trading at 10 times forward earnings, below its five-year average and the S&P 500. While some view the recent gains as a technical rebound, sustainability depends on the earnings outlook. Amidst a full swing earnings season, companies have reported a 30% drop in net profit, with tech giants like Tencent and Alibaba yet to release results, offering more insight into the market.

Beijing’s policy support, especially in the property sector, and the expectation of higher US policy rates have turned Chinese stocks into an alternative. The Hang Seng Tech Index has surged over 30% since January. While some investors are tempted to add Chinese assets tactically, caution prevails due to uncertainties in global markets. Strategic industries like semiconductors are receiving incentives, pointing towards a shift in investment strategies towards value-focused portfolios.



Read more at BNN Bloomberg: Chinese Stocks Stage a Rally That’s Yet to Convince Global Funds