(Yicai) Aug. 14 -- There are still opportunities in the Chinese mainland stock market, thanks to the low valuations and good profit growth, and it is the least sensitive of all the major stock market indexes to the US economy, analysts said.

The MSCI China Index, which tracks the shares of mid- and large cap Chinese companies listed in the mainland, Hong Kong and overseas, was relatively immune from last week’s panic selling in the US, analysts said. Due to their weightings, the MSCI Poland, Thailand and Mexico Indexes are more sensitive to the US economy.

The three main US stock markets experienced the most turbulent week since the beginning of the year last week. This also dragged down stock markets in the Asia-Pacific region, but bourses on the Chinese mainland were not as badly affected.

Short-term fluctuations can be expected, especially when the risk of overseas recessions is looming, Sunil Tirumalai, global emerging markets equity strategist at Swiss banking giant UBS, told Yicai.

The Chinese stock market also presents opportunities, said Huang Senwei, senior market strategist at US asset management firm AllianceBernstein Fund Management. Currently the valuations of firms listed on the mainland are relatively low and projections for growth in companies’ profitability will hopefully reach 13.6 percent this year.

Companies listed in Japan, whose returns are not that different from those listed on the mainland, are expected to have slower profit growth at around 9.4 percent. However, the Japanese stock market’s price earnings ratio is far higher than that of China at 15 compared to 12.

As a result, from the perspective of value-related investment, there are investment opportunities in the mainland market, although market sentiment is still a drag.

Northbound funds, which refer to Hong Kong investors trading in mainland stocks, have turned into net outflows this year. On Friday, net sales of mainland stocks was CNY7.8 billion (USD1.1 billion), and yesterday net outflows came to CNY2.5 billion. So far this month aggregated net outflows have reached CNY27 billion (USD3.8 billion).

Global hedge funds’ allocations in Japanese stocks has remained at high for years, which indicates the possible risk of overcrowding in the short run. While their allocations in Chinese stocks has been low in recent years, indicating that the risk of overcrowding is not high. But for an improvement in funds inflows, there need to be more signs of an economic recovery.

In the medium term, the market will still boast opportunities, said An Yun, deputy general manager at Schroders Fund Management’s China arm. There are a number of sectors that should be staging a turnaround soon, such as semiconductors, new energies, automation, engineering, cement and non-banking finance. And other opportunties could also appear.

The new round of investment in information technology, which is boosted by innovation in artificial intelligence, is worth watching for a long time. And in particular Chinese companies, such as new energy firms, power supplies and e-commerce logistics companies, that go global remain of interest to investors.

Editor: Kim Taylor