Made in China
China looks like a good hunting ground for value-oriented investors. Here’s why.
It’s been a tough few years for investors in Chinese stocks. The Shanghai Composite Index of Chinese companies has gone precisely nowhere. It was at 3,000 five years ago and settled there again yesterday. But Chinese companies and the economy have grown. China pumps out almost a third more stuff than it did five years ago—their gross domestic product has risen 30% since the start of 2019. And their companies have access to vast amounts of cheap Russian oil. That’s helped profits. Aggregate corporate after-tax profits have risen 50% in that time. That raises the question: is now the right time to buy Chinese stocks? Yes. China looks like a good hunting ground for value investors.
It’s a good time to buy Chinese stocks because they’re cheap. Chinese stocks are trading at relatively low multiples, especially compared to American ones. Using data from Capital IQ, a fancy financial data platform, 𝑉𝑎𝑙𝑢𝑎𝑏𝑙 calculated that the aggregate price-to-earnings (PE) ratio for China’s stock mar…