As in America, so in China during the last fall stocks from the energy, health and utilities sectors have outperformed. This is due both to the defensive characteristics of these sectors and to the fact that inflation expectations are not only an American fear but also a Chinese.

Still, China is facing a new rise in new cases of coronavirus and the health sector is attracting funds again. After all, the healthcare industry is one of the most promising for investors.

The MSCI China Index has been significantly lower in recent times and this has led valuations to normal levels. The rapid rise has resulted in valuations being considered expensive. After all, the gigantism of some companies was the reason for more reformations, which, however, also affected investment mood. As shown in the graph below, the technology sector is now valuated at normal levels, while the health sector remains expensive.

Chinese companies have also entered a period of corporate earnings announcements. Although the general outlook is positive, surprises are expected, as happened with Alibaba, which announced the first losses since 2012, mainly due to disputes with the Government. Analysts estimate that earnings per share for 2021 will increase by 22%, but this is directly related to whether economic growth will continue to be strong.

We continue to monitor consumption data which is key both to assessing its growth potential but mainly to the impact it could have on sectors such as the technological. Boosting consumption will boost investment sentiment and the Chinese market could more easily find its way to higher levels.