Despite a
slowing economy, China’s
stock market has emerged as one of the best places in Asia to invest in due to
its “very, very attractive” valuation, according to global investment house
Fidelity International.
There have
been more and more signs of a slowdown in China’s
economy, which is the largest in Asia and second-biggest globally. The country
has been embroiled in a trade fight with the U.S., which contributed to the more than 24 percent plunge in Chinese shares
last year — their worst performance in a decade.
But when
asked where is the safest place to put money in, Medha Samant, investment
director for Asian equities at Fidelity International, replied: “It’s really
north Asia, it’s being led by China, we think.”
Samant told
CNBC’s “Squawk
Box” on Friday that Chinese stock valuations are looking “very, very
attractive right now.”
“What
matters to us as active investors is ... what’s happening on the ground in
China,” she said, adding that measures taken by Chinese authorities in recent
months to support the economy have helped to raise to the attractiveness of
Chinese stocks. Some of these measures include tax cuts and reduction in the
amount that banks must hold as reserves.
Fidelity’s
sector picks
Samant said
she likes stocks in the new economy, as well as the consumer and healthcare
sectors. Her choice picks also include “very select old economy assets” for
their value and potential for yield, she said.
Even though
“the outlook is definitely more positive,” Samant said she acknowledges that
there are still headwinds facing the Chinese economy. So, investors should be selective,
she added.
“There are
these other headwinds which are impacting sentiment, which means that there
could very well be stocks pulling back ... in certain areas of the market,” she
said. “Is it time to go in and be a big buyer? Well, you got to be selective,
it comes back to that. Look for areas that still make sense fundamentally and
(where) valuation has come down.”
Slowing
China growth
China’s tariff fight with the U.S. has dragged on
for months, adding to concerns that the Chinese economy would slow down more
than expected. China is expected to grow around 6 percent this year, down from
2018′s official target of 6.5 percent, said Frederic Neumann, co-head of Asian
economics research at HSBC.
The Chinese
economy needs more support from authorities, but the “rumored” official growth target range of 6 to
6.5 percent is “still a fairly decent outcome,” Neumann told CNBC’s “Squawk
Box” on Friday.
“The problem
at the moment is the market is worried about a weaker outcome than that. China
has to signal clearly that they’ve put a floor on the growth. Once they do
that, I think we all can breathe a little bit easier,” he said.
Source: CNBC