Bulls Vs. Bears: Taking Sides On China

July 10, 2015

The Chinese mainland stock market rallied more than 150 percent in 12 months before it slipped by a third in the past month, just to rally again some 13 percent in two days. Chinese market action has been nothing short of a volatile rollercoaster ride, and now asset managers and global investors are scrambling to make sense of it all.

Opinions are certainly divided on what comes next, and what investors ought to do about their allocation to Chinese stocks. If there’s any consensus, it’s that there’s plenty to like about China’s economy long term, and plenty to fear about the trajectory of its stock market, the latest blog traffic shows.

Here are excerpts from some of the blogs circulating on China, including views from Mark Mobius, Wilfred Hahn, Barry Ritholtz and Ed Yardeni:

Bull

“About six months ago, I was asked about China’s market, which had been surging. At that time, I felt there could be a significant correction in what looked to be an ongoing bull market, but a short-term pullback wouldn’t be a big concern in terms of our long-term view on China. The question now is how much further is there to go in this correction. While I can’t predict what will happen next given all the uncertainty we have right now in the markets, we at Templeton Emerging Markets Group believe that China’s market decline is likely nearing the capitulation point, and that the investment story in China still remains compelling long term.

“In my view, the bottom line regarding the recent correction in China’s markets is essentially a story of too much euphoria and a natural correction. The government probably should have allowed the market’s early decline to run its course without additional interference that may have accelerated losses. I think it’s also important to note that the situation in Greece certainly had an impact on market sentiment in China, because investors there aren’t isolated from global news.

“While we are already investing in China, our strategy is to wait until prices are so attractive that it’s time to look for further long-term opportunities. We believe that point is close with some stocks, but we probably haven’t hit the bottom yet. In our view, the China story is still intact. China is still growing at a good pace, and we believe it’s an important global market that we want to have exposure to for the long term.”

 

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