Weekly Market Recap
Week in review
- RBA keeps cash rate at 0.1% in line with consensus
- Chinese CPI inflation 2.3% y/y
- Chinese loan growth 11.7% y/y softer than expected
- U.S. official policy rate and taper announcement
- Australia labour market report
- Australia business and consumer confidence
Thought of the week
Chinese equity markets are starting to claw back some of this year’s losses as investors’ attempt to decipher the impacts of regulatory change. However, the PBOC eased some policy measures last week and the government has lessened restrictions on the property market. The real estate sector will likely be a drag on growth, but the policy shifts in the last week signal a willingness to ensure economic growth targets remain within reach. A stable outlook, especially when it comes to the property market, may sway investors’ appetite for Chinese assets at a time when growth opportunities in developed markets are looking harder to come by. Valuations on equity markets globally have come down as earnings have rebounded. However, many EM equity markets, and China in particular, have relatively undemanding valuations. There may be ongoing policy risk associated with some sectors, but others such as renewables or consumer services may have a policy tailwind.
EM and Chinese valuations looking relatively attractive
Current P/E valuations compared to 15 year average
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