JPMorgan Strategist Moore: China's Stocks 'Screamingly Cheap'

Thursday, 08 Aug 2013 08:36 AM

By Dan Weil

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Chinese stocks trade at very attractive valuations now, says Kate Moore, chief investment strategist for JPMorgan Private Bank.

Indeed, "China is screamingly cheap," she tells CNBC.

"It's at 8½ times forward earnings. It's about a 40 percent discount to developed markets. It's a gigantic 2½ standard deviations cheaper than it historically is, even to developed markets. We think a lot of bad news is in the price."

Editor’s Note:
Forbes Columnist: ‘Who the Hell Cleared This?’ (See Shocking Video)

The Shanghai Composite Index of Chinese stock prices has dropped 9.6 percent so far this year.

Moore acknowledges that corporate earnings are less transparent in emerging markets. "In China, though, we think we're getting better anecdotal evidence from some of the companies," she explains.

"Everything we're getting from the policy side ... [is] supportive," she notes, adding that there are six plans to improve urban infrastructure.

And, "I'm incredibly encouraged by the fact that they're trying to reduce capacity in industries that are not efficient and don't have any good margins," she states.

JPMorgan is bullish on U.S. stocks, Moore stresses. "We're 'overweight' the U.S., ... but I think that's a very consensus call. I think everyone I know is long U.S. dollar assets."

In China, look for a shift in sector leadership over the long term, Andy Cao, fund manager for HSBC Jintrust China Technology Equity Fund, tells The Wall Street Journal.

"China's pillar industries will shift from traditional ones — such as steel, cement, coal and sectors that consume a lot of energy — to new industries, especially innovative technology companies that will improve the quality and efficiency of China's economic development," he says.

Editor’s Note: Forbes Columnist: ‘Who the Hell Cleared This?’ (See Shocking Video)

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