A leading French fund manager says that shares in Chinese real estate developers are set to tumble by as much as 20% due to the unsustainable nature of housing prices.
Sina reports that Claude Tiramani, Senior Equity Emerging Markets Fund Manager with First Finance, currently holds a favourable of China’s equity markets, which he believes are on track to outperform those of other regions.
According to Tiramani Hong Kong-listed Chinese stocks, in particular finance and consumer-related stocks, will benefit from the central government’s concerted efforts to curb debt levels and rebalance the economy.
The Paris-based fund manager points out that China’s debt-GDP ratio is likely to slide further over the next several years, which will reduce systemic risk and bolster the banking sector, pushing their market value closer to book value.
Data from Bloomberg indicates that the price-to-book ratio of China’s big five banks is currently 0.76, given current forecasts of 2017 book values.
Efforts by the central government to rebalance China’s economic growth model will also be of benefit to consumer-related stocks over the long-term.
Tiramani counsels investors to keep clear of shares in real estate developers, however, on the grounds that Chinese housing prices are currently unsustainable, and could potentially drop by as much as 20%.