It’s time to increase investment in Chinese stocks as risks of government intervention are priced in, BlackRock says

• Risks to Chinese stocks are priced in, and investors should consider buying while they remain cheap, BlackRock analysts said.
• Investors are so underweight Chinese stocks that increased investment wouldn’t equate to a bullish bet, the analysts said.
• The BlackRock note comes a month after the company said investors should as much as triple their allocation to Chinese stocks.
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Chinese stocks are priced in line with their risks, and investors should consider buying while they remain cheap, BlackRock analysts wrote in a note on Monday.

Doubling down on previous remarks, the world’s largest asset manager said that many investors were underestimating Chinese stocks, scared off by a wave of state intervention that has crimped many companies’ valuations.

“We believe the significant repricing – Chinese equities underperforming US peers by more than 30 percentage points so far this year – and a rise in equity risk premia in Chinese equities are overdone,” the BlackRock analysts wrote. “Investors are compensated for risk at current valuations in our view.”

It is impossible to ignore the scale and scope of recent government action, the analysts said, but investors are so deeply underweight Chinese stocks that increased investment wouldn’t equate to a bullish bet on the country.

“Currently very small client allocations to Chinese assets would imply a view that China will become essentially un-investable despite its growing importance,” they wrote.

The BlackRock note comes a month after the company said investors should as much as triple their allocation to Chinese stocks.

The asset manager also debuted the first-ever Chinese mutual fund run by a foreign firm, a move that financier George Soros slammed as a “tragic mistake” that would endanger US national security.