This morning, China’s Securities Times newspaper—the official paper of China’s securities regulator—carried reports from five major Chinese brokerages (link in Chinese). Each claimed that China’s big stock market panic is over; they all believe China’s stock markets will rebound, and that the third quarter this year will be a stable one. Whether that’s true or not, two things are certain: Stocks are cheaper now than they were a month ago. Brokers and money managers inside and outside of China now feel that there’s money to be made.
But how? Here are some recommendations (please note—Quartz is not endorsing any of these stock tips, we’re just passing them along):
Buy China’s industrial stocks
Fidelity Investments, the US-based investment company, believes mainland industrial businesses should make a good buy because these were the companies that got battered the hardest on the way down. Robert Bao, who runs a $2 billion China-focused fund for the company, told Bloomberg that small- and medium-cap Hong Kong companies might also a good deal.
Pick up a China deal in Hong Kong
Another option would be to buy your favorite China companies on Hong Kong’s Hang Seng Index, Marketfield Asset Management recommends. The index lists both Chinese and international companies, but has sold off severely after the loss in confidence in mainland markets. The Hang Seng China Enterprises Index, which tracks Hong Kong-listed Chinese companies, currently trades at 8.2 times projected profits, compared with 15.6 in Shanghai.
Pick up a non-China deal in Hong Kong
Niklas Hageback, a partner at Hong Kong-based Valkyria Kapital, told Bloomberg investors should buy up Hong Kong companies that have had their stock prices decimated, but which are not connected to mainland Chinese issues at all, like Hong Kong utilities companies. “I’ve never seen things this cheap. For a long term investor this is fantastic.”
Listen to the government
China’s Zheshang Securities’ investment strategy report (link in Chinese) for the second half of the year, argues that the bull market hasn’t finished, and neither has China’s economic growth. It suggests investors go big into securities, real estate, and mining. Both the real estate and mining sectors have been in crisis mode for quite some time in China, and Zheshang’s tactics seems to be to follow industries it believes the government won’t allow to fail—pretty basic, but good advice nonetheless.
Selectively listen to the government
Analysts from CLSA had a different approach. In a July 9 report, they told investors: “The best-performing sectors in the correction thus far have been Banks, Telcos, Oil and IT. These are the sectors that are likely to see the most government buying and support.” Small and mid-cap stocks also seem distressed, CLSA said.
Maybe these optimistic projections are right as the Shanghai Composite Index closed on July 10 up 4.54% and the Shenzhen Index up 4.09%.