A stunning reversal in Chinese stocks from world’s worst to best performers is stoking cautious optimism that the rally will continue as long as favourable market policies remain in place. With State funds seen drumming up the market while the economy faces persistent headwinds, the rally may well be on borrowed time. “Many investors have been underweight China and need to quickly reconsider their positioning,” said Karine Hirn, partner at East Capital Asset Management. The MSCI China Index is trading at 8.9 times forward earnings estimates, below its five-year average of 11.9 and emerging market peers’ reading of above 12. It would not be surprising “if China stocks staged a bit more of a rally here,” Chris Wood, global head of equity strategy at Jefferies Financial Group Inc., wrote in a note this week.

Source: The Hindu February 25, 2024 04:45 UTC