Chinese stocks have given up much of their recent gains as investors debate whether the bottom is really in. Fresh data only seem to reinforce how China’s problems can’t be fixed in a few days, while questions swirl around how much — or how willing — policymakers are to act. One theme that hasn’t changed in such an uncertain environment is playing specific stocks. Evercore ISI strategists said many U.S.-listed Chinese stocks are “oversold” and expects those “trading at depressed valuations with an attractive [earnings per share] backdrop to outperform,” analysts said in a Jan. 28 report. They screened for names with more than $1 billion in capitalization and expectations for earnings growth in the next two years. Another criteria was whether the stock is trading at a more than 50% discount to their 10-year average price-to-earnings ratio or more than 50% below its pandemic peak. Part of Evercore’s thesis is that Beijing will take further policy action after an annual parliamentary meeting in early March. The People’s Bank of China has announced a 50 basis point cut to the reserve requirement ratio, effective Monday. The Lunar New Year, China’s biggest holiday of the year, essentially kicks off the following Friday and lasts for an entire week. Such signals come at a time when Chinese stocks have sold off sharply. Evercore pointed out that, at the time of its report, more than 85% of stocks in Hong Kong’s Hang Seng Index traded below their 200-day moving average — “an extreme which in the past coincides with bottoms and strong reversals.” The Shanghai Stock Exchange’s A share index has also fallen below a so-called National Fate Line going back to around 2005, Evercore said. Chinese stocks – whether measured by those that trade in the mainland, Hong Kong or U.S. – have fallen for more than two years. That’s meant funds that have done well have had a value tilt in recent years . “Whether it will necessarily change from value to growth is difficult to…
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