Chinese stocks will outperform by five percent over the next three months and investors should look to buy now, Helen Zhu, chief China strategist at Goldman Sachs, told CNBC on Wednesday.
In an interview on CNBC’s “ Worldwide Exchange ”, Zhu said Chinese shares are currently undervalued. “Expectations towards Chinese equities have fallen pretty significantly over the last 12-24 months,” she said.
“Starting from the fourth quarter of 2010, China’s relative valuation versus Asia, versus emerging markets and versus the world has really widened. We have seen a 20-to-25 percent de-rating relative to other global markets,” she said.
Chinese shares in sectors sensitive to the macro economy offer particularly good value, according to Zhu.
“The very prevailing trend in the recent past has been that people have shunned macro sensitive sectors… Many of them trade at trough valuations well below 2008 financial crisis levels,” she said.
Sectors Zhu likes include banks, due to their high price-to- earnings ratio and earning spreads in the “mid-teens”, plus cyclicals such as retail and cement.
Zhu added that the only non-macro sensitive sector that Goldman Sachs is overweight on is healthcare.
“We think valuations have come down significantly, and for a 20 percent-plus earnings spreads, we think this is a relatively decent entry point with most of the regulatory risks probably priced in,” she said.
By CNBC.com'sKaty Barnato