RBC Wealth Management said that China is working hard through a challenging transformation from an export-led and capital-intensive economy toward a domestic consumption-based model.
“While the manufacturing sector remains vulnerable and GDP growth has slowed, consumers are spending, the services sector is growing at a respectable rate and the all-important housing sector is showing nascent signs of improvement.
RBC’s message to its investors is that while volatility could indeed occur in the near-term, valuations are not a major restraining force on the market.
The firm recommended that investors with a 12-month or longer time horizon maintain a targeted allocation to equities.
HSBC Private Bank said in early October that Chinese banks are trading way below book value on what it thinks are overblown fears over asset quality as the economy slows.
“At current values, Chinese bank stocks offer value and good upside,” the bank said.
Columbia Threadneedle said that its growth forecast for China would be 5% to 6%, lower than the official Chinese forecast of 7%.
The fund house, however, noted China still offers pockets of investment opportunities and it is optimistic about the rebalancing process underway in the Chinese economy.
“On the official figures, the Chinese economy appears to had slowed from just over 14% to 7% currently – matching the experiences of South Korea and Japan,” said Maya Bhandari, director of the firm’s multi-asset allocation.