China’s A shares, world’s worst performers last year, are ‘most investible’ in 2019, says fund house
- Two years as world’s worst performing market just a short-term disruption, says fund house
- MSCI’s inclusion of A shares in its indices to have boosted foreign investment in these stocks
After holding the title as the world’s worst performing market for two straight years, China’s A shares would be among the “most investible” assets globally in 2019, according to Invesco Great Wall.
The benchmark Shanghai Composite Index lost 24 per cent last year as investor sentiment weakened on the China economy’s dimming prospects as effects of the trade war with the US bites slowing economic growth further.
“Despite these circumstances, we think the A-share market’s recent poor performance is only a short-term disruption that in fact, has made valuations very appealing for A-share investors to stay invested for the long term,” said Kevin Chen, chief investment officer of Invesco Great Wall, a Shenzhen-based joint venture between the US fund house Invesco and Great Wall Securities.
“Given the recent correction in A shares, we believe they are now among the most valuable investible options globally,” he said.
His optimism was based on the view that China’s shift from an investment-driven economy to a consumption- and services-led one, coupled with the deleveraging drive would lead to a balanced and sustainable growth trajectory.
Given the recent correction in A shares, we believe they are now among the most valuable investible options globally
Chen said new economy companies, whose cumulative earnings surged 376 per cent in the 10 years between 2007 and 2017, would drive growth. Earnings growth of old economy companies fell 2 per cent in the same period.