It may be too late to jump on China's property bandwagon, but there are still plenty of bargains in the market.
Photo: China Overseas Land & Investment

Translated by Andrew Vanburen from a Chinese-language piece in Sinafinance

THE SHANGHAI COMPOSITE INDEX, the go-to tracker of shares listed in Shanghai and Shenzhen, is currently at levels 16% down from a year earlier.

Lots of money has been lost in the market during the period and investors are looking for any solid justification to jump back in and recover their funds.

For such an important matter, it is perhaps best to shop around the analyst circles and take a collective look at things from several different vantage points.

Four seasoned market watchers weighed in with their thoughts, with one theme more or less unifying their diverse opinions:

There is still fundamental weakness in the domestic stock markets, it’s not going to disappear anytime soon, and the primary causes of the weakness are domestic.

This may come as somewhat of a surprise to anyone who has even casually been following the onslaught of bad news coming out of Europe and North America these past few months.

Here is what the four experts have to say about where China’s capital markets might be headed.

China Investment Securities said that the possibility of another credit easing move this month from the People’s Bank of China could help pry open the window for a stock market rally.

“We saw how the freeing up of an additional 650 billion yuan last month had a ‘medium-grade’ effect on the stock market. If inflation is kept to under 3% then the next credit thaw will likely provide even more market lift,” the brokerage said.

It said that for this reason, investors should keep a very close eye on June inflation numbers, as reaction to the CPI will play a big role in opening the floodgates to potentially more investment capital flowing into the bourses.

China shares are currently down around 16% from a year earlier

Citic Securities said it considers anything below 2,300 territory for the Shanghai Composite Index to be a good place to “aggressively accumulate.”

“The recent affirmation by the State Council of a ‘stable growth policy’ is good news in its own right. However, the tools required to stimulate domestic growth are starting to get a bit worn from overuse.

“In addition, there is still plenty of uncertainty overseas – especially with the upcoming elections in financially fettered Greece,” said the brokerage.

Therefore, Citic said that pulling a few levers on the domestic front may help stabilize things at home, but there’s no lever long enough in the region to affect the fate of Greece, Spain and other EU members teetering on the brink of insolvency.

But given the fluid state of affairs in Europe, there was still the potential for a sudden upsurge following any good news, and therefore investors might consider 2,300 points a good jumping-in level for domestic shares.

Equally so, investors are advised to keep one eye on their stocks and another on Europe, as things could just as easily go sour in a hurry on the continent.

Shenyin Wanguo echoed Citic’s stance, concurring that the 2,300 point level for the benchmark index was a near-term safe bet.

“With murmurings of further rate action and other stimulus measures moving from the rumor mill to the ‘near certainty’ arena, now might be an opportune time to establish positions.

“We feel that the 2,300 level offers a risk averse entry point for the bump that will follow further supportive measures from Beijing.”

Finally, Industrial Securities said bargain hunters should be champing at the bit these days rather than wringing their hands.

The brokerage said that other than property plays which have been outperforming the Shanghai Composite year-to-date, all other industries offered a wide range of bargains.

“We think it’s time to start stocking up, and this status should endure for a few months at least.”

See also:

CHINA SHARES: Market Watchers All Over Map

FOREIGN TASTES: What QFIIs Are Buying In China

HALF HEARTED: 50% Of PRC Firms Expect Weaker 1H

ALL BLACKS: China’s Listed Brokerages All Profitable

NEW KID ON BLOCK: 21 A-Shares In Red; 4 In Hot Water

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