UOB Kayhian has put it pointedly: Overweight S-chips. Valuations are attractive. Investors' concerns over China's economic slowdown have been overdone.
“It is time for smart money to move around,” added the stockbroker in a special report just released.
“We have upgraded S-chips from ‘market weight’ to ‘overweight’ primarily on attractive valuations.
Compared with China domestic A-shares and H-shares, S-chips have been trading at deep discounts after a severe correction in 2H07.”
UOB Kayhian partnered leading investor relations company Financial PR to organize a Corporate Day in Shanghai last Friday (Mar 28) targeting at QDII fund managers.
The event featured nine S-chip companies that are leaders in their respective industries.
“Though they undergo cyclical growth, they have solid fundamentals and are growing rapidly. There is no doubt a few of them will eventually become respectable global enterprises.”
On a macro basis, China does face challenges such as soaring prices of commodities.
But UOB Kayhian pointed out that China has a closed financial system and strong domestic consumption, and will be able to ride out this difficult period.
"We still believe China could achieve 10% GDP growth and CPI growth of below 5.5%. A hard landing and hyperinflation are unlikely to take place in China."
Full UOB Kayhian report, here.