Examining valuation drivers for China equities

SINCE end-October 2022, China’s offshore listed equity markets have surged by nearly 50 per cent, more than doubling the impressive performance of A-share equities, which themselves have nearly doubled the 11 per cent rise in global equities. The Chinese yuan has strengthened by nearly 7 per cent against the US dollar.

As is historically typical, the policy pivots which marked the October 2022 lows coincided with valuations rebounding from their troughs during the 2008-2009 global financial crisis.

This rebound, however, leaves MSCI China still trading below long-run average valuations, as the reacceleration of the Chinese economy looks set to take hold.