China's monetary tightening set to ease in Q3

ON EMERGING MARKETS

HSBC's Mandy Chan believes the next one to two months could provide a good period of entry into China.

Chinese market valuations have fallen to attractive levels following the recent correction. Despite the concerns, 2011 earnings growth estimates remain positive, with the Chinese market forecast to grow by an average of 15%-16% in 2011 with a prospective dividend yield of 2.9%. Based on consensus earnings forecasts, the MSCI China is trading at around 11.5x 2011 price-to-earnings ratio, which is below its average of 12x since 2000. But we expect low growth and high inflation in the near term (next two months), which may not support a constructive picture on the market. But we also ant...