- "Price drives research and analysis, not the other way around," writes BAML's Ajay Singh Kapur, with a line anyone in the business should tape to the top of their Bloomberg terminal.
- What was for a long time a sizable underweight position in Chinese equities by money managers, has now likely become a small overweight, says Kapur. "Our hedge fund clients seem to be very engaged on the long side. Bull markets create their own narrative, as do bear markets."
- But what about Chinese stocks being cheap on a price-to-earnings basis? Focus on enterprise value instead, says Kapur. Corporate debt of $12.5T is 125% of Chinese GDP vs. 101% in Japan, 67% in the U.S., and 45% in India. Using enterprise value to earnings (enterprise value would incorporate debt), the valuation of Chinese A-shares is the highest in the world on an absolute basis.
- ETFs: FXI, ASHR, CAF, YINN, PGJ, GXC, FXP, YANG, CHN, PEK, MCHI, TDF, XPP, YAO, GCH, ASHS, YXI, CN, CHXF, FCA, CNXT, CHNA, KBA, JFC, AFTY, CHAU