Every time Chinese stocks are this cheap they spend the next year soaring, says AllianzGI boss
- On the last three occasions the price-to-book ratio has been this low, A shares have produced gains averaging 55 per cent, says Andreas Utermann, CEO of AllianzGI
- The relaxation of restrictions on foreign investment will also help the market bounce back, he says
Now is the time to invest in China’s domestic stock market if history is any guide, according to the head of Allianz Global Investors (AllianzGI), one of Europe’s biggest asset managers.
Andreas Utermann, chief executive of AllianzGI, said low valuations in the so-called A-shares market and the relaxation of restrictions on international investors mean a strong rally is on the cards.
After the country’s benchmark Shanghai Composite Index shed a quarter of its value last year, it is now at a level which historically has always tended to precede a sharp rise, he said in an interview with the South China Morning Post in Hong Kong during a recent visit.
The price-to-book ratio for the MSCI China A-share index has started the year at 1.54 times, close to its historic low of 1.47 times in 2014.
Utermann said the last three times since 2005 when the price-to-book ratio breached 1.6 times, the index has gone on to enjoy big gains in the following 12 months. In fact the average annual total return on those occasions has been an impressive 55 per cent.