Tue Sep 24 04:10:48 UTC 2024: ## Chinese Stocks Poised for Rebound: Gavekal Research

**HONG KONG -** A leading research firm, Gavekal, has predicted a strong rebound in Chinese stocks in the coming months, citing undervaluation and anticipated government stimulus measures.

In a note released Monday, Gavekal expressed “very bullish” sentiment on Chinese equities, recommending investors to adopt a long position in the market before a potential bull run. This prediction came just ahead of China’s announcement of a series of stimulus measures, including a reduction in bank reserve requirements, lower mortgage rates, and liquidity support for local stocks. These measures have already sparked a rally in Chinese markets, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes climbing over 2% from their eight-month lows, and the Hong Kong Hang Seng index surging over 3%.

Gavekal highlights the undervaluation of the Chinese market compared to gold, and the higher dividend yields on Chinese stocks compared to government bond yields. This scenario, they argue, has only occurred twice before, both resulting in significant market rallies.

The firm predicts further government intervention to stimulate the market, including potential tax cuts for local businesses. This expectation stems from the consistent underperformance of Chinese stocks over the past two years, attributed to deflationary trends and a decline in the property market.

While the past two years have seen investors pull back from Chinese markets, it has also created attractive opportunities, particularly for major Chinese internet firms trading at discounted prices. Given these factors, Gavekal remains optimistic about the future of Chinese equities.

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