emergingmarket stocks have gotten crushed and given the potential downside for chinese stocks buying the dip isn’t yet a sure bet the msci emerging markets index is down almost 8 since its february peak much of that is due to trouble in china given that many components of the index are reliant on strong demand there china’s nonmanufacturing and manufacturing purchasing managers indexes which measure levels of economic activity have declined sharply from early in the year according to citigroup economists a renewed surge in cases of covid19 has hit growth and for much of the year the people’s bank of china’s monetary policy was less supportive of expansion than it had been citi’s global equity strategists advise holding off on buying emergingmarket shares chinese stocks account for roughly 35 of the total market capitalization of the emerging market index and they still look expensive according to citigroup stock prices haven’t yet reflected the full extent of the economic slowdown according to the bank the average stock on the msci china index is trading at 13 times the pershare earnings expected for the coming year while that is down from 18 times in february it is still 7 higher than the average multiple on the emergingmarket index excluding chinese names citi’s data show historically chinese stocks trade at an average 5 valuation premium to their emergingmarket peers “so even after the recent selloff chinese equity valuations do not look especially cheap” wrote robert buckland citi’s global equity strategist “we are not yet tempted to buy the dip and remain underweight em equities” still buying at current levels is hardly a bad idea economic growth in china may soon improve as the chinese central bank has recently said it wants policy to support the economy already growth in chinese gross domestic growth is expected to be above 5 for the next two years according to factset data don’t forget it is hard to time the bottom of a selloff and the emerging markets index has already begun to rise it is up 75 from the low point it reached in late august