By Tim Gardner, co-manager of Legal & General Multi Manager range.
Last week saw the release of the much anticipated Q3 GDP data for China. The economy grew in line with the consensus forecast of 7.4% yoy in Q3 with growth accelerating to a 2.2% rate over the quarter versus the 2.0% seen in Q2. Other data released for September also showed signs of a pick up or stabilisation in the economy as industrial production increased 9.2% yoy (consensus forecast was 9.0%), retail sales by 14.2% (consensus 13.2%) and fixed investment 20.5% (consensus 20.2%). In addition, broad money (M2) and bank lending look as though they have bottomed and started to turn up over the past several months whilst it is also interesting to note the recent upturn in Chinese equities.
Widespread pessimism has led to Chinese stocks trading at single digit multiples and at a discount to both Developed and Emerging Markets but if the economy is indeed stabilising and a hard landing avoided then current valuations look relatively attractive in our view.