Experts say no bottom in sight for Chinese stocks
SHANGHAI: Shanghai is the world's worst performing major stock market this year despite respectable corporate earnings, a disconnect feeding growing talk that Chinese equities are a screaming buy.
Not so fast, said brokers and analysts, who warned that shares will continue to fall due to the US-China trade spat, slowing Chinese economic growth and a government crackdown on debt that is drying up liquidity.
Despite China's still enviable economic growth of over 6 per cent, the Shanghai Composite Index is down 19 per cent this year and flirting with levels not seen since late 2014.
Share valuations in relation to earnings are the most attractive in years, down as much as 50 per cent compared to 10-year averages in some cases.
Investors are waiting to pounce, said Mr Zhang Qun, chief market strategist with Citic Securities.
Anticipation of a rebound has also been fed, brokers told AFP, by major-listed companies snapping up their own shares, viewing them as undervalued. But the market is unconvinced, sluggish trading volume last week hit its lowest levels in two years.
The year was not supposed to be this way. The Chinese government began the year on guard against excessive share price rises. Optimism was fuelled by the June introduction of hundreds of Chinese companies into MSCI's global equities indices.
But the decline is by no means irrational, said Mr Brock Silvers, managing director of Shanghai-based investment advisory Kaiyuan Capital.
"The economy is slowing, inbound investment is declining, credit is worsening, the trade conflict is expanding, the yuan is weakening and global interest rates are rising," he said.
"There is little hope for positive momentum until China's economy revives or it reaches a trade truce."
Securities giant Nomura said it expects China's economy and exports to weaken, has trimmed forecasts for key China share indices, and was shifting money from Chinese equities into cash.
There are potential trade war bright spots, Nomura added, saying Chinese consumer brands could benefit from "buy domestic" sentiment. - AFP
Get The New Paper on your phone with the free TNP app. Download from the Apple App Store or Google Play Store now
