Chinese equities sentiment to strengthen over 2022
Investor sentiment towards Chinese equities should strengthen as valuations and earnings expectations bounce back and Chinese government intervention starts to ease, according to Maple-Brown Abbott.
Speaking to Money Management, William Main, Maple-Brown Abbott portfolio manager, said these type of conditions had historically been a good set up for equity returns going forward.
According to the boutique investment management firm, China has underperformed by the biggest amount in over 20 years relative to US equity markets.
“So we think that there's certainly some mean reversion that's likely to go on there, when you've got a US market trading close to record valuations and Chinese valuations looking pretty attractive at the moment,” Main said.
Geoff Bazzan, Maple-Brown Abbott head of Asia Pacific equities, said Asian valuations looked attractive relative to alternative asset classes, particularly other equity markets, and that earnings revisions had held up better than the market had implied – meaning forward multiples looked good.
“Many of the stocks that we've held over the last couple of years that have disappointed in many respects, have started to perform quite strongly,” he said.
“We've seen a range of names in the portfolio up, plus 25% in the last couple of months.
“I hate to mention month-to-date performance because you never know until it's over, but for what it's worth, as of the middle of January, the alpha for our strategies is looking very attractive, over 400 basis points, which is pretty strong on a monthly basis.
“So we're feeling pretty positive coming into this year and I think the broad backdrop is likely to continue to favour stock picking rather than… the macro led kind of environment that has pervaded for much of the last couple of years.”
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