Ulrich sees China A-shares undervalued
0 
China's A-share market could be set for a recovery, according to Jing Ulrich, Managing Director of Equities and Commodities at J P Morgan.
"I think there's a good chance the A-share market in the next 12 months should outperform global markets," she told reporters in Beijing on September 16.
Ulrich said the caution of domestic investors, reflecting worries over government policy, was the main factor restraining the market. But sentiment among international investors is much more positive.
"Emerging markets are seen by international investors as a bright spot. China especially is seen as a shining light in the rather unexciting world economic landscape," she said.
As the policy-related concerns of domestic investors begin to dissipate, the A-share market, currently near historic lows, should gain momentum, she said. The CSI 300 index is currently close to 2900, compared to a historic high of around 6000.
Another sign pointing to a recovery is that A-shares are now cheaper than Hong Kong H-shares, reversing a long-term trend. "In June 2009 the premium was nearly 50 percent. But now that premium has turned into a discount, which makes the A-share market even more attractive," Ulrich said.
Ulrich said that after many years of talk about rebalancing the economy from investment and exports to consumption, the government is taking action. Pointing to a 24 percent increase in minimum wages so far this year, she said sectors that will benefit include staples, clothing and branded apparel, household supplies and entertainment.
Companies involved in the new economy sectors of logistics, renewable energy, automation and advertising will also do very well, she said.
Fears that a property crash might derail the economy are overblown, Ulrich said, adding that she foresees no substantial correction in the housing market. After a plunge in home sales in Q2 following new government regulations, volumes have recovered and prices are still rising at nearly 10 percent annually. Price increases will gradually moderate as a government commitment to 5.8 million low-cost housing starts per year increases supply, she said.
Ulrich also said she is "very bullish about copper" given the urgent need for China to modernize its electricity grid. China currently imports around 50 percent of the copper it uses. "If China decides to build a smart grid and high voltage transmission lines there's not enough copper in the world to supply the country," she said.
Go to Forum >>0 Comments