Value comeback gaining traction
- Chinese value stocks are rebounding as funds rotate out of overpriced AI and tech names.
- The MSCI China Value Index is on track for its best quarterly outperformance versus growth peers since 2022.
- After three quarters of underperformance, sentiment has turned as traders seek earnings resilience and income visibility.
| Quarter | Value vs Growth Performance (ppts) | Investor Sentiment Index (0-100) | Dividend Yield (Value, %) | Dividend Yield (Growth, %) |
|---|---|---|---|---|
| Q4 2023 | -0.8 | 42 | 3.6 | 1.1 |
| Q1 2024 | -0.9 | 40 | 3.8 | 1.0 |
| Q2 2024 | -0.6 | 45 | 3.7 | 1.2 |
| Q3 2025 | -1.0 | 47 | 3.9 | 1.3 |
| Q4 2025 (e) | +6.0 | 65 | 4.1 | 1.4 |
Earnings discipline and policy catalysts
- Value names trade at ~9.3x forward earnings, roughly half that of growth peers, offering a strong valuation cushion.
- Dividend yields and cash flow strength attract defensive inflows amid profit warnings in AI-linked firms.
- China’s next Five-Year Plan is set to support industrial upgrading, manufacturing, and household income, all benefiting value sectors.
Rotation with staying power
- The rotation signals a maturing market, shifting focus from speculative themes to stable fundamentals.
- Sustained policy support and corporate discipline may extend this trend into 2026, underpinning broader market stability.
Cordoba View
- China’s market is entering a phase of valuation normalization and capital discipline.
- The value rotation reflects investor pragmatism and policy alignment with sustainable sectors.
- Dividend-rich, state-linked, and reform-driven industries stand to outperform as AI momentum cools.
- We remain selectively constructive on quality value exposure as a balanced way to position for a steadier China recovery.
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