2024-02-09 22:58:59 ET
Summary
- Chinese equities have started the year on a bearish note.
- But at current levels, I wonder if valuations have diverged too far from fundamentals.
- There are few better ways to play a China turnaround than via a diversified, low-cost vehicle like FLCH.
This time last year I was (wrongly) bullish on Chinese equities coming out of an extended period of on/off COVID lockdowns. After cashing in the chips soon after, market sentiment has only worsened and shown no sign of improving. Chinese consumers also continue to sit on an even bigger cash hoard at a time when price levels have turned deflationary and with property in the throes of a deep downturn. As for the easing response thus far, everything has been incremental and rather ineffective vs the large-scale stimulus measures rolled out in the past. The latest round of policy announcements, including surprise rate cuts, property easing and a (to be confirmed) CNY2tn stock market rescue package , represent a positive step forward in reigniting the economy, but still hasn’t had enough of a market impact....
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FLCH: A Contrarian Play On Extreme China Pessimism