“The snapback in China could be fairly meaningful,” Timothy Moe, chief
Asia Pacific equity strategist at Goldman, said in an interview
Wednesday.
“The risk versus reward in terms of what’s priced in the market gives us a sense that if we see a stabilization in macro data, say from here to the end of the year for example, then we could see a decent recovery.”
The MSCI China Index has lost more than 30 percent from its April high as a mainland equity turmoil spread across the Hong Kong border and data pointed to a deepening economic malaise. The gauge trades at 8.6 times profits, says Bloomberg. At market lows in 2008 and 2011, it bottomed out at 7 times and 7.8 times, respectively.
Moe said that these are quite low valuation
levels, which are not really far from the floor found during the
previous times of collapse. He also noted that further monetary policy
easing, as well as decent financial stimulus and reform will follow.
Even after trimming
interest rates for the fifth time since November and telling lenders they
can keep less cash, Chinese authorities remain under pressure to do
more to buoy the nation's economy.
A manufacturing index dropped to the lowest reading in three years in August, while profits at the Chinese industrial companies slipped 2.9 percent in July.
