Chinese Stocks Poised For Best Quarter Vs. S&P 500 Since 2007 As Investors Bet On Policy Turnaround

Chinese equities are on track to deliver their strongest quarterly performance relative to the S&P 500 in nearly 15 years, as investors rotate out of overvalued U.S. stocks into battered Chinese shares, betting on a policy-driven recovery.

The iShares China Large-Cap ETF (NYSE:FXI) has surged 26.6% year-to-date through March 17 close, heading for its best quarterly performance since early 2009. Meanwhile, the SPDR S&P 500 ETF Trust (NYSE:SPY) is down 3.2% year-to-date, pushing Chinese stocks' relative outperformance to nearly 30%, the widest margin since mid-2007.

Value Partners Group expressed optimism about the Chinese equity market, stating in an email Monday that "the China A-share market is close to the bottom. Valuations are low, and so are market expectations, which means downside risk is limited."

The firm anticipates an upward market ...