Short Bets on China Could be "Dangerous": HSBC Analyst07-20 16:24 Caijing
Betting on declines in Chinese stock market could be "dangerous", as Chinese equity markets are already cheap and the economy is poised to rebound, said Herald Van Der Linde, head of equity strategy for Asia-Pacific at HSBC Holdings Plc.
"At this point in time, with low valuation and massive shorts in the market, it is not rational to bet that China will further fall from here," he said in an interview from HSBC's Singapore office Thursday.
One measure of bearish sentiment, the Hang Seng China Enterprises Index, has fallen 19 percent from February 29's peak and the price/earnings ratios was down to 7.7 times, compared with an average of 14.8 times in the past five years. The Shanghai composite index also shed 11.4 percent from the peak the first half of the year had seen on March 2.
The analyst highlighted owning Chinese telecoms, railway, cement and retail shares, as the most favored trades for the year. He also predicted China to cut the reserve requirement ratio for banks for the fourth time this year.
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