Investors see many bears on the road in China. Maybe a little too much, Invesco thinks. According to the asset manager, Chinese shares have therefore become very cheap. The American asset manager Invesco has changed his model portfolio on a number of points. This is apparent from the opinion piece Why I Like Chinese Equits by investment analyst Paul Jackson.
As the title says it, he mainly addresses Chinese shares and why they remain attractive after the recent rally. According to Jackson, it is not a Dead Cat Bounce. But there are also other striking changes in the Invesco model portfolio.
For example, the fund manager is still underweight in bonds, but the prospects are getting better. The model portfolio is 32% filled with bonds. Corporate bonds with a high quality label (Investment Grade) and those from Emerging Markets (apart from China) are the favorites. Furthermore, shares have been given a slightly higher weighting, at the expense of real estate, among other things.
But Chinese shares really stand out at Jackson. Check Ipostocksplanner.com for more information. That has nothing to do with that everything goes so fantastic in China. On the contrary, everything is wrong. The big advantage is that the share valuations are extremely low in relation to other regions, with the US and India taking the crown.
Jackson uses the Cyclicular-Adjusted Price-Earnings Ratio (CAPE) as comparison material. That is a ratio in which the price is compared to the average win over a period of 10 years.
On the other hand, everything is wrong. One of China’s biggest problems is that the diplomatic relationship with the United States is getting killer. Secondly, there is the strict regulation of technology and real estate companies that put pressure on the profits and frighten investors.
Third there is Corona. In 2020, China was still the country that was best due to the crisis. But in 2021 that changed when China was one of the few countries not to take advantage of a post-corona repair. This year the Lockdowns came over it.
Jackson has a good feeling that it is getting better from now on and that the most bad news is incorporated in stock prices. He also thinks there is a good chance that the government will now take it a bit easier with the regulation urge and corona measures.
But for those who do not rely on their feelings, Jackson points to the valuations. The Cape ratio has an excellent track record when assessing whether shares are expensive or cheap. It is often difficult to estimate when exactly the nodding point comes.