Wait for clarity in China
By Christoph Riniker, head of Equity Strategy Research, Julius Baer
Today, Chinese equity markets have again lost almost 8%, putting more pressure on European and US trading. Looking at various indicators, the negative sentiment is clearly reflected in the markets.
The put/call ratio as well as the volatility have spiked, reflecting the almost panicky sentiment among investors.
However, taking a longer term view shows that more negative is still possible. It is therefore too early to say that we already see buying opportunities on current levels.
As long as we do not know how the Chinese government will react in regard to their domestic growth we would rather stay at the sidelines. However, the longer term fundamental assessment as outlined in various publications still points to better market conditions going forward.
The only problem we currently have is the unknown time span between today and when fundamentals become more pivotal again.
Today we will see further price declines in Europe and the US be we would not call them buying opportunities. Stay at the sidelines until we have more clarity.