UBS says Chinese stock valuations are ‘very attractive,’ but don’t expect a quick rebound

Chinese stocks currently look “very, very attractive,” but are unlikely to see a quick turnaround in the next few months, according to UBS Global Wealth Management’s Kelvin Tay.

“I think China is cheap. If you look at the performance of China this year, on a relative basis, it has actually underperformed by about 40% against both the European indices as well as the American indices,” Tay, regional chief investment officer at UBS Global Wealth Management, told CNBC’s “Squawk Box Asia” on Tuesday.

As of Tuesday’s market close, China’s CSI 300 index, which tracks the largest mainland-listed stocks, has fallen nearly 5% for the year. In Hong Kong, where many of China’s tech titans are listed, the Hang Seng index has plummeted more than 14% in the same period.

In comparison, the S&P 500 on Wall Street rose to a new record close — its 69th in 2021 — as recently as Monday. Over in Europe, the pan-European Stoxx 600 has gained more than 22% for 2021 as of its Tuesday close.

“From a valuations perspective, from a positioning perspective, China certainly looks very, very attractive,” Tay said.