Sakhi Siva at Credit Suisse says China is super-cheap, after having fallen 11% in a few weeks:
..Historic P/E for Shanghai has dropped to 15.3x, which is 9% below the averageof 16.9x seen during the last three troughs in January 1996, November 2005 and October 2008.
Shanghai’s price-to-book has dropped to 2.3x, which is 15% above the 2x average seen during the last three lows.
What’s interesting is that Shanghai’s historic P/E and price-to-book are at trough valuations despite the ROE of 15.1% being well-above the 11.4% seen during those three lows. We reiterate our OVERWEIGHT call on MSCI China.
Top picks from the Credit Suisse GEM model portfolio (see our report of 26 May Positioning for 2H rally) are China Coal (added on 26 May), Evergrande Real Estate, Shenhua and Dongfeng Motors (all three added on 3 March), and CCB, ABC and CNOOC.