GOLDMAN Sachs Group Inc. is sticking with its bullish view on Chinese mainland stocks in Hong Kong, saying valuations are inexpensive and improving economic data will spur a rebound.

    “The snapback in China could be fairly meaningful,” Timothy Moe, chief Asia Pacific equity strategist at Goldman, said yesterday.

    “The risk versus reward in terms of what’s priced in the market gives us a sense that if we see a stabilization in macro data, say from here to the end of the year for example, then we could see a decent recovery,” Moe said.

    The MSCI China Index has slumped more than 30 percent from its April peak as a mainland equity rout rippled across the Hong Kong border and data pointed to a deepening economic slowdown. The equity measure trades at 8.6 times profits. At market troughs in 2008 and 2011, it bottomed out at 7 times and 7.8 times, respectively.

    “These are quite low valuation levels and the ones that are not too far off where the market has found a floor during previous times of stress,” Moe said. “There’s going to be further monetary policy easing and decent fiscal stimulus, and continuing reform.”

    Even after cutting interest rates for the fifth time since November and telling banks they can hoard less cash, Chinese policymakers remain under pressure to do more to support the world’s second-largest economy.

    A manufacturing gauge fell to the lowest reading in three years in August, while profits at the nation’s industrial companies slipped 2.9 percent in July.

    (SD-Agencies)