Jefferies joins growing list of China equity bulls on valuations

Jefferies joins growing list of China equity bulls on valuations

Stocks















Bloomberg

Jefferies Financial Group Inc strategists turned bullish on Chinese stocks, saying they’re due for a rebound after getting hammered by a year of regulatory crackdowns and a slowing economy.

After being underweight on Chinese equities for most of 2021, “the case for a mean-reversion led bounce is building,” Jefferies strategists including Desh Peramunetilleke wrote in a January 17 note. The US brokerage is forecasting a 23% return for the MSCI China index this year with an 83% probability of a positive return.

With the call, Jefferies joins a growing chorus that includes Goldman Sachs Group Inc. and UBS Group AG touting opportunities in China stocks. While regulatory risks linger, especially for the tech sector, an overnight statement from China’s securities watchdog vowing support for overseas listings helped ease investor concerns to some extent.

Jefferies expects an earnings growth of 7% for MSCI China in 2022, compared with the consensus estimate of 15%. The brokerage is positive on both offshore and onshore China stocks.

It saw the case for mean reversion as particularly strong for the internet sector, especially if regulatory policy

announcements slow.

“Valuations on the internet sector are now attractive