Asia Shares Near Record But China Investors Aren’t Celebrating

MSCI Inc.’s Asian stock benchmark is just a fraction away from clearing a peak that’s stood for a decade. Chinese investors should be so lucky.

Gauges of the nation’s shares in both Shanghai and Hong Kong remain more than 40 percent below their highs reached in 2007, with the bursting of 2015’s bubble adding to woes. While Chinese stocks have rallied this year, they’ve been a poor long-term bet: the Hang Seng China Enterprises Index has fallen for six of the past nine years.

“It might take a few years for Chinese equities to catch up to their Asian peers,” said Daniel So, a Hong Kong-based strategist with CMB International Securities Ltd. “The markets were full of bubbles in 2007.”

The road to recovery for Chinese shares has been bumpier than for the wider region, where equities regained momentum over the years as monetary conditions were loosened. The mid-2015 market collapse sent Shanghai stocks careening almost 50 percent and prompted authorities to crack down on financial leverage.

Inexpensive valuations mean there is still upside for Chinese stocks, but that will be limited as government curbs on old industrial sectors crimp profits, So said. And policy-backed new economy businesses won’t be able to drive overall earnings growth any time soon, he said.

Southeast Asian stocks have been some of the region’s best performers in the past decade, with benchmarks in the Philippines and Indonesia more than doubling, while Thailand’s SET Index has climbed 93 percent.
Source: Bloomberg