Trade War with the US, a slowdown in the overall economy and an imploding yuan are all factors having dragged the Chinese stock market lower. On the other hand, we have seen fund inflows, active buybacks and “low” valuations.
We wrote about China on relative lows versus the US Stock market two weeks ago. With the recent pick up in US stock volatility and the “sudden” sell-off among the FAANGs, maybe after all the relative China long play is worth a thought.
The long-term ratio of Shanghai versus SPX is at levels not seen in a long time. Note on both previous occasions the Chinese market started a big relative outperformance.
The lower chart shows the daily chart which has already started to pick up some.
Source: charts by Bloomberg