Mobius believes that while a 9 per cent drop in China’s Shanghai and Shenzhen “A” share market triggered widespread selling on a global scale, people should not forget that a similar correction happened in May and June of last year, only for markets to rebound and reach new heights.
He says: “The correction in Chinas A stock market has come amid uncertainty ahead of the annual National Peoples Congress meeting in March and record high valuations. In fact, A shares are currently trading at a P/E of 44x, approximately four times the valuations of HK stocks.
“The A shares have nearly doubled in the last seven months, making them more vulnerable to declines and volatility. After the fall on 27th February, A shares rebounded nearly 4 per cent on the 28th. Asian and European markets, however, recorded further declines of 1 to 3 per cent.”