Eddie Chow, senior executive vice president and managing director of the Templeton Emerging Markets Group, recently shared on Mark Mobius’ blog his perspective on some key themes his team is watching in 2015 for China in the year of the goat. The post included his following comments about Chinese stocks:
“While we see reasons why Chinese equities could continue to perform well this year, we also believe it will be difficult to repeat 2014’s strong performance. Stock valuations have come up, and the growth outlook for corporate earnings has not improved by as much. Additionally, margin financing has ballooned, reaching high levels, causing the government to put on some curbs recently. We believe the government could enact further measures to help prevent small investors from becoming overleveraged and the market becoming overheated. Therefore, in our view, last year’s strong market performance shouldn’t lead investors toward unrealistic expectations this year.”
As for where investors might find opportunities in China during the year of the goat, Chow had this to say:
“We see China’s economy also likely to continue to be under adjustment in 2015 and that, along with the need for reforms of the ownership structure of state-owned-enterprises (SOEs), may provide some potential opportunities for investors. Some industries, for example paper and cement where excess capacity has been largely streamlined, may also offer opportunities. With more rate cuts seen potentially coming from the PBOC, banks may also benefit through lower loan loss as corporate customers will have less interest payment burden.”
He concluded by saying they “believe there is no reason the goat and the bull cannot be friends.”
To read the whole post, Will China’s Year of the Goat Bring Out the Market Bulls?, go to Mark Mobius’s blog on the website of Franklin Templeton Investments.
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