Click here to view my International Business TImes Video:
Discussion of China as an attractive investment
There are times in investing when going against the flow can be very profitable. I believe that investing in China today is one of those times.
Conventional wisdom holds that the Chinese growth "miracle" is over after a number of years growing at a double-digit rate, with the economy now slowing rapidly. Writing recently in the Guardian, renowned economist Kenneth Rogoff highlighted the risk of Chinese slowdown, pointing out a number of key challenges that could derail the Chinese government as they seek to rebalance the behemoth that is the Chinese economy.
But, as is often said in financial markets, there is a price for everything. Moreover, money is rarely made by investing in what is comfortable – government bonds being a case in point at the moment, relatively safe but offering only ultra-low yields. China looks a compelling investment opportunity at the moment, in spite of the widespread "slowdown" worries.
China is still growing at over 7% per year...
Whatever concerns economists may have over China, let us not forget this Asian giant is still growing at over 7% per year in real terms; compare that to the sub-3% growth of the UK, and the non-existent growth in the eurozone.
This sounds strong to me, even if no longer a double-digit growth rate. After all, the law of large numbers makes it increasingly difficult for China to continue to grow at such a fast rate, now it is officially the second-largest economy in the world after the US when adjusting for the cost of living (according to the World Bank), more than double the size of the third-placed country, India.
Chinese Stocks Are Very Cheap
The Chinese stock market is one of the cheapest stock markets in the world, when judging by a standard metric such as price/earnings (P/E). Chinese stocks on average trade at under 9x forecast P/E, while offering a dividend yield of well over 3%. Compare this to the US stock market which trades at over 15x P/E, or the FTSE 100 which trades at nearly 13x P/E. In addition, profit growth is forecast to remain in the double digits, more than can be said for the European and US stock markets next year.
Chinese stocks are starting to outperform
The MSCI China A-Shares exchange traded fund (ETF) listed in London has gained nearly 26%…
