As investors look for opportunities after the pullback, with some turning the emerging market countries like China, some may consider Chinese financial companies and related country-specific exchange traded funds for a more stable approach to the developing economy.
According to State Street Global Advisors, cheap valuations and a government that can easily bail out pockets of China’s financial sector from instability makes the country’s bank stocks a buy, Bloomberg reports.
Olivia Engel, chief investment officer of active quantitative equity at State Street Global Advisors, argued that Chinese banks provide return-on-equity levels as high as any other segment in the emerging markets.
“While investor sentiment is poor vis-à-vis Chinese banks, earnings forecasts are starting to turn upward,” Engel told Bloomberg. “The resulting valuation gap among Chinese banks – especially when viewed together with favorable quality attributes in this segment – presents a margin of safety for investors.”