According to a presentation by Rahul Chadha, co-director of Mirae Asset Global Investments Investments, despite the over 40% correction seen in recent months, the A-share market in China is still overvalued. However investors should not panic because “valuations in Asia are still very attractive with a price over book value of 1.25x. At these levels, investors have historically achieved positive returns in 12 months” Chadha writes.
The presentation notes that 85% of the A-shares market is held by retail investors, of which 81% operate at least once a month, whereas in the US, 53% of retail investors operate monthly. One important thing to note is that according to Chadha, more than two thirds of new retail investors did not attend or finish High School.
For Portfolio Positioning, Chadha identifies key differences in between what he considers Good China vs. Bad China. Under Good China he highlights industries that are Under-penetrated, less capital intensive, with sustainable economic moats, such as healthcare, insurance, clean energy, internet / e-commerce, travel & tourism. While on the Bad China side we can find Well-penetrated industries that are capital intensive, have low barriers to entry and weak pricing power such as steel, cement, capital goods and banks.
You can find the document in the attachment.