Chart of the Week and Weekly Report Highlights
This week: Tech Wreck Check, Global Equity Technicals, Monetary headwinds, China Aye Shares, NZ Equities, Leveraged Equity Bets, Commodities, REITs.
This email provides a look at what we covered in the latest Weekly Insights report
The Weekly Insights Report is part of our entry-level service: presenting some of the key findings from our institutional research service.
Chart of the Week - China Cheap Again
China A-Share Valuations: While much of the rest of the world is increasingly entrenched into bear market mode, Chinese equities are looking more and more interesting as China continues zigging while the rest of the world is zagging.
Valuation-wise, China A-shares are looking cheap after a period of weakness. And this is actually a change from recent times where valuations had gotten expensive after China managed to initially evade the virus but still benefit from global stimulus.
Ironically, now the virus (along with policy tightening and property downturn) have shifted things back into cheap/attractive territory. To be fair though, it is worth remembering for this market the 3 P’s (Policy, Property, Politics) are key, and while they previously imparted headwinds, there are early signs of progress.
And that is basically just a nod to the old truism in investing that cheap valuations alone are often not enough: you usually need some sort of macro-catalyst to kick things along. And we’re certainly doing a lot of research work on that front, and there are some interesting themes/trends emerging.
Meanwhile, from a technical standpoint, the bounce off of long-term support/uptrend-lines for both China A shares and the MSCI China index looks very compelling.
So a tick for technicals, and a tick for value.
Key point: China A-shares are trading on cheap valuations.
Oh, and one more thing, the reason why you see 2 PE ratio lines in this chart is because the most common pushback when you say China is cheap is something along the lines of yeah but that’s just because of bank stocks. So the black line provides some visibility on what valuations look like excluding the banks.
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Topics covered in the latest Weekly Insights Report:
Tech Wreck Check: Valuations have improved, but still early days for tech.
Global Equity Technicals: Clear bearish momentum, few promising signs.
Monetary Markets: Heavy duty tightening and harder headwinds.
China aye Shares: Change in recommendation for Chinese equities.
NZ Equities: Some improvement made, but further downside likely.
Leveraged Equity Bets: No sign of material deleveraging as of yet.
Commodities: Indicators turning bearish for commodities.
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ALSO v3.0: On that note….. !! IMPORTANT ANNOUNCEMENT (/reminder)!!
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Callum Thomas
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