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Are Chinese Stocks the Next Safe Haven?

Think safe haven and gold, yen and the swiss franc come to mind. But one strategist thinks investors who want low volatility and a sure bet for the next few years, should bet on Chinese stocks.

A local investor watches the share-prices index display at a stock brokerage in Shanghai.
Liu Jin | AFP | Getty Images
A local investor watches the share-prices index display at a stock brokerage in Shanghai.

"What we've seen this week is an effective downgrade of the United States and the Eurozone economies and currencies, and the omission of China in that conversation is essentially an upgrade for China," Aaron Boesky, Chief Executive Officer of Marco Polo Pure Asset Management told CNBC on Friday. "China's looking quite safe at this point." Click here for full interview.

Boesky said the past week had shown that Chinese stocks were less volatile than the rest of the region. He pointed to the fact that in Tuesday's volatile trading session, when Korean stocks dropped nearly 10 percent in intra-day trade and the Hang Seng dropped 8 percent, Shanghai stocks were relatively flat by lunchtime.

Boesky is especially bullish on the market given its forward price to earnings ratio of just 11.5.

"It's been (the) cheapest we've ever been in the entire history of Shanghai market on a full year basis," Boesky said.

To add to that, Boesky believes a stronger yuan and a drop in commodity prices will ease inflation - which has been the biggest threat to China's economy.

"Growth has returned, earnings have returned after two years of a big slump coming off '06 and '07," Boesky said. "I mean you're not going to beat that."

As a result, Boesky has some pretty lofty valuations for the market. He's forecasting gains of between 200 and 500 percent over the next few years, which would take the index to a range of between 7,500 and 12,500.

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