China 2017 forecast

“Our economists are highlighting a relatively tighter monetary policy and capital controls at the start of 2017 but the main planks of our optimism for onshore China equities in 2017 are intact: a) a return to earnings growth and b) asset class rotation away from bonds and property back to stocks.

Our target price for the Shanghai Composite remains 4,400 (+42% versus current levels) with earnings per share of 200 for 2017 (up over 10% from last reported trailing integer and a forecast 6% yoy growth) and target P/E of 22x (currently 17.6x and a 5-year range of 9.5x to 25.0x) with a re-rating driven by asset class rotation away from property and to a lesser extent bonds. However, a more slowly maturing bull market now seems likely

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