China Stocks: Is Now the Time to Buy?

Includes: ACH, CWDK, EJ, FXI, GA, VIEW
by: Vlada Kynsky

Over the last couple of days, I found several articles about Chinese stocks and Shanghai Composite index as such. Most of them declared that China is undervalued and said that now could be right time to buy.

Below are two articles from Finance Yahoo and Tech Ticker:

  • The China story has only begun.  The article highlights some interesting cheap Chinese stocks. Aluminum producer Aluminum Corp of China (NYSE:ACH) and water supply company China Water and Drinks (OTC:CWDK).
  • You can watch another story about 3 Cheap China Stocks [Giant Interactive (NYSE:GA), Cogo Group Inc. (COGO) and E-House (NYSE:EJ)], on Tech Ticker.

I still remember that one year ago many analysts expected China’s bubble would burst after the Olympics. Although this prediction didn't come true, the Shanghai Composite Index is down 60% from October's high. Without question, it has been the worst performing world index during this period.

If I look at the valuation trailing P/E ratio, it is 17.2%. Even more interesting is the FY1 P/E ratio. By dividing the latest price with the forecast EPS for FY1, I found that the FY1 P/E is 14. The valuation of 14 for the country, which continues to grow between 8% - 10%, offers a very nice discount.

Disclosure: None