China in your tactical portfolio: the market is now investible

OVER the past two years, China’s economy has encountered many challenges, including a severe property market crisis, weak employment prospects, deflationary pressures, declining consumer confidence and escalating tensions with Western countries.

On the global stage, investor sentiment towards China has also soured, resulting in significant foreign capital outflows in 2022 and 2023.

Opportunities in dirt-cheap valuations

The exodus has resulted in a significant drop in the value of Chinese shares. As at Aug 30, the 12-month forward price-to-earnings (PE) ratio of the MSCI China Index was at a 21.5 per cent discount compared with its 10-year historical average. Additionally, the market valuation reflects a considerable discount relative to its emerging market peers and the global market overall.