Free Trial

Chinese Equities Screening Undervalued


Executive summary

  • Divergence in monetary policy between China (easing) and the Fed (tightening) could lead to several opportunities in Chinese risky assets, which have been trading at ‘distressed’ levels in recent months due to the significant deceleration in economic activity.
  • In addition, CNY could also start to depreciate against the US Dollar in the coming months after appreciating sharply against major crosses in the past 18 months.
    • MNI INTERVIEW - Yuan Seen Peaking Near 6.2 Against Dollar In Q2 (page 7)
  • Major risk for China remains its zero-Covid policy, which keeps weighing on growth expectations and therefore maintains uncertainty elevated in markets.

Link to full article:

China Rotation.pdf

The divergence in monetary policy between US (preparing for tightening) and China (easing) could lead to a rotation from ‘expensive’ (i.e. US tech) to ‘cheap’ (China tech) stocks. China tech is undervalued following the sharp selloff in 2021. China tech (CQQQ) is down over 45% since its high reached in February 2021 (which corresponds to the peak in the Chinese economy).

The tech sector (China) could also be supported by a reversal in China ‘liquidity’, which seems to have found a bottom in Q4 2021. The chart below shows the strong co-movement between China TSF 12M sum and tech equities (YoY change) in the past cycle.

Source: Bloomberg/MNI

To read the full story



MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.