Chinese equity: taking advantage of discounts?
Financial markets/economy
Posted by MoneyController on 09.08.2024
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What is the situation of the world's second-largest economic power, China, from the perspective of financial market investors?
The strong economic growth that China had become accustomed to in recent years is slow in coming. The hope now, as Sandra Riccio writes in 'La Stampa', is that after the Third Plenum of the Chinese Communist Party, the measures devised by the government may begin to have a positive effect on what has so far been one of Beijing's greatest weaknesses, the property market, which after the Evergrande and other sector operators' crisis has not yet managed to recover.
The uncertainty surrounding the future development of the Chinese economy is also reflected in the performance of the stock market: as Riccio points out, the Csi 300 stock index has fallen by 0.5% since the beginning of the year; this figure is even more significant if one compares it with the rises achieved in the first quarter by the US stock exchanges (it is still very difficult to make credible forecasts on the bearish phase embarked upon by the American stock exchange in the second half of the year).
With regard to the risks and investment opportunities offered by China today, Riccio reports on a number of considerations by some investment experts and financial analysts. For example, Banor experts point to the discounts in Chinese share valuations, especially when compared to US share prices. Nonetheless, there is no shortage of challenges for Beijing: as Banor's experts also point out, GDP growth is likely to fall below 4%, a phenomenon that could lead to social unrest; it follows that - even in the face of Trump's possible re-election and, in any case, in view of the imposition of further duties - China may have to focus mainly on its domestic market.
Riccio's article also includes some remarks by Wellington Management's Macro Strategist, Nicolas Wylenzek, who points out that those discount prices embody the economic and geopolitical risks facing investments in China.
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