Four Elements: China’s rank relative to Asia – EPS growth Back in the Black But Still Pricey

Watch the video with Andrew Stotz or read a summary of the country profile on China.



Four Pillars of GDP: Driven by private consumption

Overall, the economy remains a high growth destination for many investors, due to its 6.88% growth rate in 2015. Private consumption remains the largest driver of growth followed by Investments. Though all four pillars below are contributing to GDP, net exports contribute the least.

EPS growth Back in the Black

The market is expected to return to double-digit EPS growth this year, after earnings fell in 2014 and 2015.

Warren Buffett: If You Own A Good Business, Keep It

Berkshire Hathaway Warren BuffettBuying private businesses is easier than acquiring public firms, and investors should avoid selling good investments at all costs, according to the Oracle of Omaha, Warren Buffett. Q2 2020 hedge fund letters, conferences and more In an interview with CNBC in March 2013, Buffett was asked if he was looking at any businesses, in particular, Read More


Yet stocks remain the second most expensive in Asia at 16x PE expected in 2017. Only The Philippines trade at a higher PE ratio.

Heading into 2017, #China Remains Unattractive

A. Stotz Four Elements: China’s rank relative to Asia

Overall, China is somewhat less attractive in Asia considering all our four elements: Fundamentals, Valuation, Momentum, and Risk.

Fundamentals: With a moderate ROE of 12% expected in 2017, China sits slightly above the Asia average, which is positive.

Valuation: 2017 consensus estimates put the country’s price-to-earnings at 16x, a figure that is the second highest PE in Asia and thus fairly expensive. Additionally, a low average dividend yield of 2% won’t turn many heads.

Momentum: Earnings momentum remains poor in China.

Risk: China features a relatively low beta to Asia ex-Japan and offers only moderate volatility.

Strong performance in Materials and Consumer Discretionary

Top 3 largest sectors: Financials: 22% of the market. Industrials: 18%. Consumer Discretionary: 13%.

Best sector & stock: Telecom: +39%, China United Network Communications: +53.6%

Worst sector & stock: Information Technology: -0.9%, GuoChuang Software Co. : -27.2%


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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.

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Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company providing institutional investors with ready-to- invest portfolios in Asia that aim to beat the benchmark through superior stock selection. The company also provides buy- and sell-side clients with financial models to value any company in the world and World Class Benchmarking to determine what companies are financially world class. Previously, as Head of Research at CLSA, Andrew was voted No. 1 Analyst in Thailand in the Asiamoney Brokers Polls for 2008 and 2009. He was also voted No. 1 Analyst in Thailand in the 2009 Institutional Investor magazine All-Asia Research Team Report. Andrew earned his PhD in finance at the University of Science and Technology of China in Anhui province, with a focus on answering questions raised by fund managers and analysts during his career about picking stocks and managing portfolios. In addition, Andrew has been a lecturer in finance for 22 years at various universities in Thailand. Since 2013, he has been the president of the CFA Society of Thailand. He is also the author of How to Start Building Your Wealth Investing in the Stock Market.