Even after the recent market rally, Chinese valuations are not yet excessive but are fair, HSBC Global Research said in a research report.
The research house noted that news on the "Shenzhen Connect" and monetary easing could support Chinese equities. For now, HSBC believes it's not time to sell Chinese equities yet (the risks are clearly rising), but it does look to rotate into laggards.
HSBC added that where China differs from the rest of Asia is that earnings estimates have been upgraded recently, although that has not been a relevant driver of the recent
rally.
It's all about the anticipation of further southbound flows from China, of which there is likely more to come (in the form of the "Shenzhen Connect"). HSBC said global mutual funds (i.e., international, non-Chinese funds) do not reflect the bullish sentiment about
China, as they have sold Chinese equities in the last 3-4 months. Many global funds are still underweight China, which suggests that some more buying will be required.
15/04/2015 14:59
[I-bank focus]Not time to sell Chinese equities yet - HSBC
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