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Is Now The Right Time To (Finally) Buy China?

Published 11/26/2014, 07:14 AM
Updated 07/09/2023, 06:31 AM

Chart 1: Chinese stocks have underperformed other indices for years…

Emerging Market Indices

I have started to purchase Chinese stocks with meaningful positions. I first opened this trade only a few weeks ago, and then recently added more as China cut interest rates for the first time in over two years. I am bullish on the country's long term prospects, but I also like the stock market due to favourable valuations.

Chinese equities (via iShares FTSE/Xinhua China 25 Index (ARCA:FXI), in yellow on the chart) have essentially gone nowhere since the Lehman panic in late 2008 and early 2009. A gain of about 35% in almost six years is a total disaster and a huge underperformance (dividends not included). And this is precisely why I believe it might just be the right purchase.

Could China play catch up? We will soon find out.

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