Shameful to Goldman sachs, Deutsche bank & Pimco, china stocks shed more than 22% from April 13 ,as they bullish china stocks.


cited as following:


Pimco Is ‘Large Overweight’ on China, Predicts Earnings Growth in Region
By Belinda Cao and Sara Eisen - Apr 14, 2011 12:42 AM GMT+0900Apr 13, 2011 11:42 PM CT

Pacific Investment Management Co., manager of the world’s largest mutual fund, is buying Chinese stocks on the prospect for earnings growth as monetary tightening eases.
The emerging-market equity fund has a “large overweight in China,” where financial and property stocks are attractive and Pimco has a “favorable view of the yuan,” said Maria Gordon, who was hired last year to manage the fund. An underweight rating in Brazil reflects “better value elsewhere,” and some shares in India and Turkey are “likely to become cheaper before they start to rise,” she said.
China’s fourth interest-rate increase in six months, announced April 5, spurred strategists at four of the world’s biggest banks to recommend stocks in the fastest-growing major economy. Credit Suisse Group AG boosted its 12-month forecast for the Hang Seng China Enterprises Index, HSBC Holdings Plc increased its rating on China to “overweight,” and Macquarie Group Ltd. said investors should lift holdings. Citigroup Inc. advised buying options to bet on gains.
“This is the space wherein companies trade at a significant discount to their net asset values,” Gordon, formerly a portfolio manager at Goldman Sachs Group Inc., said in an interview with Bloomberg Television. “We look for companies that may have been affected by cyclical adversity, where the earnings story is likely to be better once the story is normalized.”
Bullish Forecasts
The recommendations, which follow bullish forecasts last month from Goldman Sachs Group Inc. and Deutsche Bank AG, signal confidence that Premier Wen Jiabao’s government will curb the fastest inflation since 2008 without derailing growth in an economy forecast by the World Bank to expand 9 percent in 2011.
The price-earnings ratio of the Hang Seng China Enterprises Index, or H-share index, is 22 percent below its five-year average after profits surged 32 percent last year, beating analysts’ estimates, data compiled by Bloomberg show.
“We’ve seen 18 months of macro-prudential measures under way,” said Gordon. “We’ve also seen the reflection of those worries in the equity market.”
The gauge of 40 Chinese companies listed in Hong Kong, known as the H-share index, has dropped 0.1 percent since the People’s Bank of China began raising interest rates in October, trailing an 8 percent gain in the MSCI Emerging Markets Index. When China’s borrowing costs increased a similar amount from October 2004 through March 2007, the index jumped 113 percent.
‘Upside Potential’
Sanford C. Bernstein & Co. raised its share-price estimates for Chinese banks in a report yesterday, saying lenders may extend recent rallies on first-quarter earnings.
The Hong Kong-traded shares of Chinese banks including Industrial and Commercial Bank of China Ltd. “still have about 10 percent upside potential from the current valuations in the near term,” after outperforming the market by 8 percent to 9 percent since mid-February, analysts including Mike Werner and Wangshu Qiu said in the report.
China’s currency has strengthened 1.1 percent versus the dollar this year, following a 3.5 percent appreciation in 2010.
Pimco EqS Emerging Markets, the fund managed by Gordon, is part of a push into equities by Newport Beach, California-based Pimco, which has been synonymous with bond investing since it was co-founded by Bill Gross four decades ago.
‘Structural’ Growth
Emerging-market nations have “very significant structural growth opportunities” and “strong-trend earnings growth” in comparison with developed-market peers over three to five years, Gordon said. “Bubble and risk have faded partly because of the worries about the mid-cycle rebalancing,” she said.
The MSCI emerging-market index has climbed 3 percent this year, trailing a 4.5 percent gain for advanced-country shares. China’s Shanghai Composite Index has risen 8.6 percent this year, after losing 14.3 percent in 2010. India’s Bombay Stock Exchange Sensitive Index has fallen 4 percent, while Brazil’s Bovespa Index has declined 3.4 percent.
In Brazil, there’s “clearly a disconnect” between “the amount of infrastructure and its growth rate it is exhibiting,” Gordon said. “When the output gap closes you’ll have inflationary pressures. So we’re experiencing the need for that mid-cycle rebalancing.”
Gordon said her fund also has holdings in Kazakhstan, where there are “stock-specific opportunities.”
To contact the reporters on this story: Belinda Cao in New York at lcao4@bloomberg.net; Sara Eisen in New York at seisen2@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos atpapadopoulos@bloomberg.net