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Chinese Stocks: Still a Bargain as Prices Rise
Pinnacle Digest writes: Frank Holmes has been a long time supporter of the Asian giant and believes Chinese equities are poised for a strong rebound after being heavily discounted in recent months. There has been strength across the commodities market as demand from China continues to exceed estimates.
Imports for commodities rose in the month of September. Copper imports into China increased 11 percent compared to the previous month due to increased demand from power infrastructure, white goods restocking and auto production. Pareto Securities reported that Chinese implied oil demand came in at an all-time high of 9.8 million barrels per day in September.
Money supply, a key lubricant of the economy and markets, also continued to increase, and this has driven Chinese equities in the past. Most often, when discussing rising prices and positive sentiment in the market today, it comes back to global money supply (which is blamed for rising prices across the world).
The MSCI China Index has responded positively to an increase in the money supply over the past decade. Holmes explains that over the past 10 years, after the supply in money bottomed, stocks soon rebounded.
On January 31, 2012, money supply hit a near decade low of 12.4 percent year-over-year growth. Since then, the number has been creeping higher, rising to 14.8 percent in September. With the money supply expected to expand further, there is little doubt this will positively impact Chinese stocks.
Holmes reiterates that this appears to be a good time to invest in China as stocks are historically cheap. At the beginning of October, BCA noted that there was a “prevailing pessimism” around China and that the stocks were “currently trading at hefty discounts to world averages and even to euro zone stocks.”
Read this article and learn more about the Chinese market which appears to be not only stabilizing, but rebounding...