[UseMoney=50]
Is it time to buy China?
With China making new ytd lows and the Beijing Olympics having
concluded, we examine the case to turn more positive.
Not yet: Remain neutral
At the macro level, growth and inflation are not yet low enough to
warrant a shift to a stimulative policy bias. On the micro level, we
anticipate further declines to consensus earnings forecasts.
Neither issue is fully discounted by the market, in our view.
Stress before relief
We expect deterioration in the export and property sectors to increase
the risks to growth. We also feel the government has the motivation
and firepower to reduce the probability of a sharp cyclical slowdown.
However, our conversations suggest that significant policy response
will require greater evidence of aggregate stress. We therefore feel
investors should await either a steeper market discount or a situation in
which the government is more likely to stimulate.[/UseMoney=50]