Chinese stocks hold bullish outlook, Gavekal Research says

Investing.com-- Chinese stocks are primed for a rebound in the coming months, Gavekal Research said in a note, stating that they were undervalued after prolonged underperformance, and that Beijing was likely to unveil more stimulus measures.

The Gavekal note came just a day before China rolled out a barrage of stimulus measures, including a cut to bank reserve requirements, lower mortgage rates and potential liquidity support for local stocks. The moves saw China’sGavekal said the Chinese market was undervalued in comparison to gold, and that dividend yields on Chinese stocks were higher than the government bond yield. Such a scenario had occurred only twice in the past, and the Chinese market had rallied exponentially both times.

Chinese stocks are by far the worst performers in Asia over the past two years, as a sustained deflationary trend in the country and a protracted property market decline saw investors largely pull out of local markets.

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