Story of China is still intact despite market downturn
13 July 2015
About six months ago, I was asked about China’s market, which had been surging. At that time, I felt there could be a significant correction in what looked to be an ongoing bull market, but a short-term pullback wouldn’t be a big concern in terms of our long-term view on China. Since mid-June, China’s domestic stock market, as measured by the Shanghai Composite Index (A-share), has experienced a plunge of about 30%, while the Hong Kong Hang Seng Index (H-share) is down about 20% from its highs in May. The question now is how much further is there to go in this correction. While I can’t predict what will happen next given all the uncertainty we have right now in the markets, we at Templeton Emerging Markets Group believe that China’s market decline is likely nearing the capitulation point, and that the investment story in China still remains compelling long term.