Editor's Note: The chart and excerpt below are from this morning's Early Look written by Hedgeye Director of Research, Daryl Jones. Click here for more information on how you can become a subscriber to this daily product designed to keep you a step or two ahead of consensus.
...Well, if you want to be a true contrarian (especially with the Shanghai Composite down -3.5% this morning) it may suggest a re-rating. As highlighted in the Chart of the Day below, China is currently trading at 9.3x next-twelve-months earnings versus 16.1x for the MSCI World Index. A re-rating to the World multiple implies 70%+ upside . . . .
We certainly aren’t suggesting you go run out and buy Chinese equities this morning. But eventually, the time will come again to believe in The Dragon. After all, with Donald Trump emerging as a legitimate candidate for President, we should all be well-practiced at suspending disbelief.