World Markets

Goldman's Oppenheimer: These China stocks look cheap

The recent turmoil in China's equities has raised major concerns on the stability of the Chinese financial system, but there are still some opportunities, according to Goldman Sachs chief global equity strategist, Peter Oppenheimer.

Chinese regulators have stumped up their efforts to intervene in the sharp falls seen in recent weeks in the Shanghai Composite, China's domestic A-share market. In spite of this, the index still tumbled 8.5 percent on Monday, even after measures to curb selling, including a cut in interest rates and a ban on short selling and major shareholders from ditching their stakes in firms were introduced.

On a valuation basis, stocks on the Shanghai Composite and the small-cap Shenzhen Composite are both trading on very lofty valuations according to analysts, currently at an average price to earnings ratio of around 20 and 50 times respectively.

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An investor watches the electronic board at a stock exchange hall in Fuyang, China.
ChinaFotoPress | Getty Images

But certain Chinese stocks listed on the Hong Kong exchange, the Hang Seng index, still look attractive on a valuation basis, Oppenheimer told CNBC.

"You have to take quite a nuanced view on China, I think it is important to emphasise there are different parts of China that are trading at very different multiples," he said.

"The smaller cap stocks at the A-share market are still trading at high 20s and that is very expensive by historic standards, whereas if you look at the blue-chip companies and those listed on Hong Kong, they tend to trade at multiples of 9.5/10 times and are relatively cheap by historic standards," he added.

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Oppenheimer said Goldman Sachs strategists were seeing value and opportunities in the blue-chip, large cap Hong Kong-listed sector of the Chinese market.

But not everyone is convinced. Chief market analyst at CMC, Michael Hewson said that no matter what, Chinese equity markets are in for a rollercoaster ride, and further weakness in commodity prices could well see markets "falling under their own weight" as small investors find themselves sitting on huge losses, on the back of borrowed money.

"The Hong Kong China H-Shares index has shown similar weakness, and while its move higher has been more nuanced, it was still up nearly 50 percent at one stage this year; it has pretty much given up all the gains seen since the November 2014 lows," Hewson said.

"A move through the July lows could well see further weakness just below 11,000 could well trigger further falls," he added.