A five-part series on what four Invesco experts think about how the current pandemic is affecting Chinese onshore equities and the economy through macroeconomic, fundamental-based and factor-based analyses.
As the Covid-19 outbreak escalates in many parts of the world, China looks set to emerge as the first major economy to recover from the crisis. Against this backdrop, what has been driving the recent performance of Chinese onshore equities? How has the outlook for China A shares and China’s economy changed amid the turmoil in global markets?
Invesco’s Chin Ping Chia, Managing Director, Head of China A Investments, recently chaired a panel discussion with fellow experts exploring these issues through macroeconomic, fundamental-based and factor-based analyses. Titled “Staying the course: Outlook for China A Shares amid global uncertainty”, the wide-ranging discussion was broadcast online in mid April. We present a summarized, edited version of the discussion, split into five parts. You can read part 1 here.
In this section, Senior Portfolio Manager for China A Quant Andrew Tong discusses with Chin Ping Chia, Head of China A Investments, on how the uncertainty has impacted valuations.
Chin Ping: I’d like to switch gears to the valuation aspect. Andrew, in the context of the various Chinese equities segments comparing A shares with other classes, what is your view on the current valuation for Chinese equities?
Andrew: If you look at the valuation gap between onshore and offshore Chinese equities, one of the best gauges is the Hang Seng Stock Connect China AH Premium Index, with about 130 pairs of shares that are listed in mainland China and in Hong Kong (see figure below).