Chinese Equities: Does the discount to fair value outweigh the risks?

Concerns from the east and west

clock • 4 min read
Lorraine Tan is director of equity research, Asia at Morningstar

Lorraine Tan is director of equity research, Asia at Morningstar

Chinese and Hong Kong equities covered by Morningstar are trading at 29% discount to fair value based on Hong Kong listed values, which can vary from those on the Mainland.

This is an attractive valuation, one that we believe takes risk from slower demand growth in China into account. But that is not the whole story. We see events outside the region acting as a potential headwind for companies in China, and something investors need to consider, along with long-term growth trends, when making investment decisions. Tailwinds blow in from the west The war between Russia and Ukraine presents two related challenges for the Chinese market. First, inflation, which is already elevated, may rise further. While China has some ability to smooth out the rise of...

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