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Strategies & Market Trends : Greater China Junior Stocks

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From: Julius Wong	4/8/2011 7:57:52 AM
	of 1992

Wen Tackling Inflation Makes Chinese Stocks a Buy at World’s Biggest Banks By Michael Patterson and Allen Wan - Apr 8, 2011 China’s fourth interest-rate increase in less than six months is spurring investment strategists at four of the world’s biggest banks to say it’s time to buy stocks in the fastest-growing major economy. Credit Suisse Group AG boosted its 12-month forecast for the Hang Seng China Enterprises Index, also known as the H-share index, predicting a 28 percent gain after the central bank raised its one-year lending rate by a quarter point to 6.31 percent on April 5. HSBC Holdings Plc (HSBA) increased its rating on China to “overweight,” while Macquarie Group Ltd. (MQG) said investors should lift holdings. Citigroup Inc. (C) advised buying options to bet on gains. The recommendations, which follow bullish forecasts last month from Goldman Sachs Group Inc. (GS) and Deutsche Bank AG (DBK), signal confidence that Premier Wen Jiabao’s government will curb the fastest inflation since 2008 without derailing growth in an economy forecast by the World Bank to expand 9 percent in 2011. The price-earnings ratio of the H-share index is 19 percent below its five-year average after profits surged 32 percent last year, beating analysts’ estimates, data compiled by Bloomberg show. “I normally don’t go along with the brokers but this time they are right,” Sandy Mehta, the Hong Kong-based chief investment officer for Value Investment Principals and a former fund manager at Putnam Investments LLC, said in an interview yesterday. “China has been pro-active in raising rates to fight inflation. Stocks are also extraordinarily cheap.” bloomberg.com

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