Strategists Say Chinese Stocks Are Cheap

China Market Stocks
  • Both JP Morgan and Goldman Sachs strategists are bullish on Chinese companies listed in the United States.
  • Chinese stocks have plunged more than 50% so far this year and have been hit hard.
  • Strategists are confident that past troubles are already discounted and stocks may have bottomed out.
  • According to them, Chinese policymakers intend to push through fiscal and monetary stimulus and meet economic growth targets.

Many investors who bet on Chinese companies have sold in a panic months ago and it is not for less. The shares plummeted and came to correct more than 50%.

In that sense, strategists from JP Morgan and Goldman Sachs affirmed that Chinese shares listed in the United States are cheap and are also optimistic in the short term.

However, there are factors to take into account: Beijing has to stabilize its economy and shore up the real estate sector, the 20th Congress of the Communist Party is coming up where it will be defined whether Xi Jinping continues with a third term, and in addition, there is the Zero Covid policy, which is quite severe. As a bonus, there are tensions with the United States over Taiwan concerns.

Investors began to notice battered internet stocks hitting a three-month high, with KraneShares CSI China InternetKWEB (KWEB) exchange-traded fund surging a further 6% on Wednesday as China approved the first big batch of video games since it capped minors just three hours of online play last summer.

Alibaba shares have also recovered a bit in recent days, jumping almost 38% in the last month, although it is still down 6% so far this year.

“We have been cautious with China last year and until recently this year, but we think the risk-reward ratio is finally improving.”

JP Morgan.

According to the US bank, Chinese politicians will strive to push through fiscal and monetary stimulus and meet the 5.5% economic growth target. Furthermore, they have argued that China has missed its growth targets only twice.

“If in the coming months, China turns its back on lockdowns, one-man rule and a crackdown on technology, choosing instead to stimulate its domestic economy while also benefiting from increased trade in commodities with Russia, then many conditions would have come together to push. Chinese stock markets, and optimism in the broader emerging market space, much higher”


On the other hand, Goldman Sachs Asia Pacific strategist Alvin So favors stocks in China that can benefit from the global climate change initiative and government support for emerging industries and technologies. “Valuations have fallen over the past year, creating attractive opportunities in companies such as chipmaker LONGI Green Energy Technology, electronic component makers Luxshares Precision Industry and BOE Technology Group, and industrial machinery company Shenzhen Inovance Technology,” he remarked.