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Hedge on These Three Chinese Companies

Despite a recent bout of profit-taking, Asian markets have rallied over the past few weeks as investors grow increasingly confident that the global economy is on the mend. The MSCI index of Asia-Pacific shares gained more than 32 percent from its year’s low hit in early March.

Daphne Roth, Head Equity Research of Asia at ABN AMRO Private Banking, tells CNBC Asia’s Protect Your Wealth, that she believes Asian markets have been overbought and a sell-off can be expected soon.

"What we advise investors to do is to position themselves for a 10 percent pullback. I don't think this time the pullback will be as violent as in the November '08 or the March '09 situation, because conditions have certainly improved, credit availability is better, and also the state of decline is not as extreme as the other time," she says.

However, Roth sees buying opportunities in the mainland Chinese market. She says that China will be a good hedge in the event that global growth continues to slow. Her top picks include Sinopec Shanghai Petrochemical, China Communication Construction and ChinaLife Insurance.

"If I compare Sinopec to the other two oil companies, it’s still very cheap. It's trading below 10 times P.E., so it will be a very good, cheap and defensive play," she explains.

"If the global recovery does not come as quick as excepted, China will continue to stimulate the economy … and also to continue with its infrastructure spending, and I believe that China Communication Construction should benefit from that."

"We also like China Life. It's more defensive, and it's a good proxy to the China market," Roth adds.

Neither Roth nor ABN Amro owns shares in these three Chinese firms.

Comments? Questions? Send them in here.


Catch "Protect Your Wealth" on CNBC's Asia Pacific network every Tuesday on "CNBC's Cash Flow," Wednesday on "Asia Squawk Box" and Thursday on "Capital Connection."