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Four Pillars of GDP: Main driver has been private consumption
Overall, China is experiencing fast GDP growth with all four pillars contributing to GDP growth, and private consumption contributing the most and net exports contributed the least.
Strong price and earnings momentum
In the past five months, China A has shown strong price performance relative to Asia ex Japan. Analyst’s forecast that earnings are expected to grow above Asia ex Japan in 2017-2019CE*.
A. Stotz Four Elements: China’s rank relative to Asia
Overall, China appears attractive in Asia considering all our four elements: Fundamentals, Valuation, Momentum, and Risk.
Fundamentals: Moderate, ROE has been in line with Asia ex Japan.
Valuation: Moderate, relatively expensive PE and dividend yield.
Momentum: Strongest price momentum, and second highest EPS growth.
Risk: Moderate, high volatility but low beta to Asia ex Japan.
Materials had the best price performance in 3Q17
Top 3 largest sectors: Financials: 24% of the market; Industrials: 18%; Consumer Discretionary: 12%.
Best sector & stock: Materials: +19.5% & Hunan Valin Steel Co Ltd: +134.8%.
Worst sector & stock: Utilities: +0.1% & Shenzhen Nanshan Power Co Ltd: -14.0%.
