China’s Slammed Stocks Are Showing Signs of Recovery

The easing of pandemic lockdowns has sparked hope, although the progress is fitful.

China’s roller-coaster stock market continues, with some hope that it is finally on the upswing as pandemic shutdowns relent. All told, the MSCI China Index is down 15% this year, almost as bad as the S&P 500 (down 16).

Chinese stocks have had a rough time since spring, given the lockdowns, but in June they appeared to recover as some of the COVID-19 strictures were relaxed. Then this month, they dipped again, off 6% through last week, amid news about worsening real estate problems. On Monday, though, things turned around once more, as comparisons between Chinese interest rates and those in the West dominated conversations.

The People’s Bank of China, its central bank, is lowering rates, because the nation is not suffering from the inflation roiling the U.S. and Europe. In the West, the Federal Reserve and its peers are tightening, as fears abound that a recession will hit.

A research report from prominent South African investment firm RisCura notes big differences between China and the West. China, it says, “does not face the same stagflation risks as developed markets, the economy is recovering from a cyclical low, stimulus is coming through, and valuations are significantly lower than developed markets.”

The MSCI China’s price/earnings ratio is 13, while the S&P 500’s is 20.