Salomon Economists Optimistic on China's Stocks

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Last updated at: (Beijing Time) Monday, January 28, 2002

Salomon Economists Optimistic on China's Stocks

Salomon Smith Barney's researchers on China said Monday that now is a good time to buy China's stocks.

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Salomon Smith Barney's researchers on China said Monday that now is a good time to buy China's stocks.

Charles M. L. Cheung, Salomon's Head of China Research, cited four factors as the grounds for this argument.

First, China stocks look cheap with a price/earnings (P/E) ratio of 10.7 times for 2002 excluding technology, media and telecoms, well below the three-year average of 12.8 times.

Second, although the worst is probably not yet over, the current slowdown is cyclical rather than secular.

"We do expect more mixed economic figures in this quarter and the second quarter. But looking beyond that, we will see a bright picture in the fourth quarter of this year," Cheung said.

The continued structural improvement is the third factor.

Cheung mentioned a number of benchmarks including the Chinese government's commitment to reforms after China's entry into the World Trade Organization and the steady drop in the renminbi non-deliverable forwards, which reflects a declining China risk premium.

The fourth factor is that a lack of retail liquidity offers buying opportunity.

Cheung picked telecoms, airlines, autos and financial as the top investment-worth sectors.

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