A FALLING stock market, the yuan’s worst month since 1994 and a U.S.-China trade war all suggest one thing to John Pearce: buy Chinese equities.

The selloff in the Shanghai Composite Index, down more than 20 percent from its January high, is overdone, and investors have read too much into the yuan’s depreciation, said the chief investment officer of UniSuper Management Pty, which controls A$67 billion (US$50 billion) in assets primarily for Australia’s higher education and research sector.

“We have used the latest selloff to build a position in China A shares,” Pearce said. “It’s all on the back of tightening U.S. dollar liquidity and fears of a trade war but we it looks overdone to us.”

Skittish investors have dumped Chinese stocks in recent weeks amid concerns on growth after a string of weaker economic data and escalating trade tensions with the Trump administration. U.S. tariffs on US$34 billion in Chinese imports took effect Friday, while China has vowed to retaliate.

The People’s Bank of China sought to shore up confidence in financial markets after the recent weakness in the yuan, pledging to keep the currency stable.

“The People’s Bank of China has confirmed that this doesn’t represent a change in policy,” said Pearce. “Everyone looks at the yuan-dollar exchange rate when the Chinese have consistently said we’re looking at the basket not just yuan-dollar.”

The yuan fell more than 3 percent against the dollar in June, the worst monthly decline since 1994 when China unified the official and market exchange rates. It’s down about 2 percent for the year against the dollar, while stronger versus other currencies including the euro, the Canadian and Australian dollars.

“People are just getting a bit too carried away by it all,” Pearce said. “If you look at the history of any major stock market — and China is a massive market — if you had blindly just bought the market after a 20 percent selloff, more often than not you’ve made money in 12 months time.” (SD-Agencies)