The violent pullback in Chinese equities has nearly run its course, according to emerging markets investment guru Mark Mobius, who is on the lookout for value in the market.
“I think we are probably getting close to a capitulation point in China,” Mobius, executive chairman at Templeton Emerging Markets Group, wrote in a blog post on July 9. The term “capitulation” refers to the point when sentiment has gone so far in one direction that a turn in the opposite direction, be it higher or lower, is a certainty.
“We should see at least a short-term bounce soon, and many investors who didn’t get out before may use that move to do so. Then, we would expect to likely see sideways action until the market can hopefully recover, provided valuations are good,” he said.
The Shanghai Composite opened down 0.8 percent on Friday, but quickly reversed course to trade up over 2 percent. This comes after the the index staged its biggest one-day percentage gain since 2009 on Thursday, surging 5.8 percent, following yet another round of measures by Chinese authorities to reverse the downturn in the market. The benchmark index, however, remains around 25 percent below its June 12 peak of 5,166.35.