LIVE MARKETS-China stocks, what's next after 40% rally?
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CHINA STOCKS, WHAT'S NEXT AFTER 40% RALLY?
Chinese stocks have been standout gainers this year, attracting investors seeking value outside the expensive U.S. market.
The MSCI China index .dMICN00000PUS has jumped as much as 40% in the last 12 months, and that begs the question about the sustainability of the rally.
UBS remains optimistic.
The Swiss bank believes the market adequately prices in risks such as potential impacts from Trump's "America First" investment policies, tariffs, and chip export restrictions, relative to other emerging markets.
Based on historical valuation relationships with return on equity, China should display a 15% premium versus other emerging markets, UBS notes. Instead, it is trading at a 30% discount.
"While it is logical to conclude the sharp rally could be followed by a period of consolidation, we still believe the market adequately factors in the risks... We remain of the view that the risks of China outperforming are higher than of it underperforming - we stay OW China," write UBS strategists.
(Danilo Masoni)
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