Global Equity Strategy
China Exposed Stocks
China Slowdown— We think the global economy can probably manage a soft- landing in China, but a hard-landing would pose a significant risk to our growth forecasts and positive view on global equities.
RMB Depreciation — Citi economists view the recent RMB depreciation as a commitment to a “managed float”, partly intended to increase the likelihood of SDR status. They expect USDCNY will drift higher.
Stocks Exposed To China Slowdown — For those investors worried about the effects of the Chinese economic slowdown, we provide a list of stocks within Developed Markets that are most exposed to China. These 48 stocks are generating on average more than 30% of their revenues from China.
Performance — Our China in DM screen has fallen by 10% since June, as worries around China slowdown have exacerbated.
Fundamentals — Despite this underperformance, they are not yet especially cheap given their EPS momentum has also been deteriorating. If the recent depreciation of CNY continues, this is likely to put further downward pressure on EPS.
For The Brave — We would recommend buying Chinese stocks directly. Our China equity strategist Jason Sun has a positive stance on MSCI China (the H shares) which is now trading at a 9.1x forward PE vs 17.1x for our China in DM basket.