Chinese Stocks Are On Sale

Chinese Stocks Are On Sale
Reda Farran, CFA

almost 3 years ago1 min

Chinese stocks have done little but drop since the Year of the Ox began on February 12th, making them cheap by historical standards.

The blue line above shows the price level of the MSCI China Index as a percentage of analysts’ price targets – that is, their estimates of what the underlying stocks are worth. The difference between the two has recently widened to historically steep levels, with the MSCI China Index now trading at a 25% discount to analysts’ targets.

Over the past 10 years, the index only traded at a discount of 25% or more to analysts’ price targets 6% of the time. And, on average, the index went on to return 10% over the next six months after dipping below that level.

That could signal a potentially attractive buying opportunity for Chinese shares or exchange-traded funds (ETFs) that track the MSCI China index, such as the iShares MSCI China ETF (ticker: MCHI).



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