CHINA’S equity market now offers the best value in the world, according to a co-founder of the Gavekal group.

China is set for a boom in corporate profits and investors should be piling into shares of companies in sectors like health care, tourism and luxury goods, according to Charles Gave.

“The Chinese stock market is undervalued against cash, Chinese bonds, gold, and other world stock markets — and it is in a state of total panic,” Gave, whose group runs the Hong Kong-based asset-allocation consultancy Gavekal Research, wrote in a note Wednesday. “It has to be the best value proposition in the world.”

He said China is at a stage where companies’ profit growth has started exceeding their cost of capital, implying earnings will boom and companies will resume investing and hiring.

The latest bout of optimism on China from Gave comes after a cut in banks’ reserve requirement ratio and news that China is considering a stock rescue package. That finally boosted the country’s stocks, which gained for a third day Thursday after a dismal start to the year.

To be sure, Gave made a similar bullish recommendation on China stocks in August — and that didn’t fare so well. The CSI 300 fell 8.7% from there into the end of the year.

Still, he has some wins to his name. He was bullish on Japan in May 2020, and since then the Topix Index has gained 71%. He said in June 2018 that world’s bear market will likely start in Europe, following which the MSCI Europe Index fell about 16% to a low in December of that year.

And now, Gave sees opportunity in a market that lost US$6 trillion in value from its 2021 peak, making it the cheapest ever versus the United States and India. (SD-Agencies)