Taps Coogan – March 16th, 2022

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As we noted a few days ago, Chinese stocks and bonds have suffered a cataclysmic selloff over the past weeks and months, pushing both to levels not seen since before the Global Financial Crisis 15 years ago.

Lest one think that the selloff in China is simply part and parcel of the broader weakness in global financial markets since the start of the year, Chinese stocks are now trading at a record discount to global averages, as the following chart from Bloomberg reveals. The chart shows the forward P/E of the MSCI China Index versus the global MSCI P/E.

Even a deep China cynic such as yours truly can’t help but wonder whether a significant low is coming into view. That being said, there is just something about investing in a ‘totalitarian communist dictatorship-for-life’ with an ageing and shrinking workforce and population that is still reliant on an imploding real-estate bubble that makes the question of whether Chinese stocks are bottoming somewhat irrelevant. Nonetheless, they may be bottoming.

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