Don't write off the Chinese consumer

ON ASIA

Against a backdrop of increased volatility, Chinese consumer stocks experienced profit-taking in the third quarter of this year.

In spite of this, Chinese equities will likely be among the first to emerge from the market correction, given China’s relatively solid fundamentals and superior stock market performance over the past few years. On the economic front, the global economic downturn should accelerate the peaking out of China’s inflation. With this in mind, China’s CPI should continue to decline in the 4th quarter. The Chinese authority may also start to loosen its monetary policy by then. The Chinese market is attractively priced after the recent retreat. Should there be a more material market correction,...