The recent selloff in U.S.-listed Chinese stocks presents a great buying opportunity according to BNP Paribas analyst Erwin Sanft.
NASDAQ
On Friday, Shanghai's B-share market for smaller companies aimed at foreign investors tumbled on growing concerns about companies formed through reverse mergers.
While worries over corporate governance and accounting standards persist, Sanft, who heads China and Hong Kong research at BNP Paribas, says investors are getting carried away and painting every small and mid-cap Chinese stock with the same brush.
"I would challenge the idea that large companies are better. In China all the large companies are state owned enterprises and all the small and midcaps are private companies," Sanft told CNBC. He added that stocks with a longer track record could be good buys.
"If you have got this sort of universal panic emerging around the U.S.-listed space, well at this point you can just go to the companies which have been listed for a long time, where they have a very long, very clean track record. It's easy to check out what they are doing."
Among the names he's recommending is NetEase.com , the number two online gaming player in China. The Nasdaq-listed company has seen its shares fall more than 7 percent since June 1st.
"It's been listed for 12 years, has never put a foot wrong, great balance sheet, great management team, only on 12 times price to earnings at the moment," Sanft said.
Sanft, who previously headed CLSA's China research team between 1998 and 2004, also likes Home Inns , a company that was founded in 2002 and operates budget hotels in China. That stock is also listed on the Nasdaq and has fallen 12 percent since the beginning of June.
"We are very surprised to see Home Inns getting sold off. Home Inns is the leader in the budget hotel sector in China, which is one of the easiest bets you can make in the China market, and it's down to 15 times PE, way below what it's usually traded at," Sanft added.
Disclosure: Erwin Sanft does not have any personal ownership in either Netease.com or Home Inns.
