Is it time to reconsider investing in China?

Philipp Wörz

There has been a lot of noise emanating from China over the past year. Slowing economic growth, fears around property values, regulatory interventions and an uneasy geopolitical environment, among other factors, have contributed to Chinese and Hong Kong stock markets losing some of their lustre.

As a result, many global investors have already jumped ship and are showing little interest in the region, and valuations are attractive. While geopolitical tensions and the property market downturn are real risks, good investment opportunities are often found in an environment of fear and uncertainty.

Sources: PSG Asset Management and Bloomberg, 24 June 2024

In previous years when Chinese stocks – especially the large tech platform companies –could do no wrong, our funds did not have exposure to this space as we did not believe lofty valuations reflected the various risks, especially governance, geopolitics and unsustainable economic policy. However, we have since seen a 52% sell-off in the Hang Seng Index from its peak in 2021 until January this year, at a time when US stock markets have been posting record highs day after day. Consequently, our investment team has increasingly viewed China-focused stocks and the Hong Kong market generally as a potential hunting ground for companies the market may be underappreciating. As a result, we have introduced several Hong Kong listed holdings into our global funds in recent months.

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