Some investors are getting tempted by cheap China stocks that have slumped 60% in 2 years — but the market started 2024 in the red

• A third of respondents to a Bloomberg poll said they plan to increase their Chinese stock holdings.
• Some investors say they are tempted by the cheap valuations of Chinese shares after a two-year slump.
• There are still considerable headwinds in China's economy, which has been struggling to recover.

China's stock markets have been in a slump since early 2021, losing nearly two-thirds of their value — which is making some investors very, very tempted.

Almost one-third of 417 respondents to Bloomberg's weekly Markets Live Pulse survey said they plan to invest more in Chinese stocks over the next 12 months, the media outlet reported on Tuesday. This is up from one-fifth of respondents in its August survey.

The MSCI China Index — which reflects the performance of large and mid-cap stocks across China — has slumped 60% since peaking in early 2021.

Meanwhile, the CSI 300 — which tracks 300 Shanghai and Shenzhen-listed stocks with the largest market capitalizations — is down about 40% over the same period.

The market slump has made China stocks the world's cheapest relative to their profits, prompting some investors to say it's a good time to pick up some bargains, per Bloomberg.

But the two indices haven't had a great start to 2024 either — with the MSCI China Index down 2.5% on Tuesday, the first trading day of the year. The CSI 300 is down about 2% so far this year.

The outlook for China's economy is cloudy as it continues struggling to recover post-pandemic and is facing significant headwinds from a property crisis and record-high youth unemployment rates.

Even Chinese leader Xi Jinping issued a rare acknowledgment of China's economic woes on New Year's Eve, saying that some enterprises had a "tough time" and that some people faced "difficulty finding jobs and meeting basic needs."

Economists are not so upbeat about China's economic outlook either.

Nomura economists wrote in a Tuesday note that there may be another "economic dip" this spring due to headwinds, including the property crisis, weakening external demand, and geopolitics.

China hasn't announced its official growth target for 2024, but government advisors told Reuters in November that they would recommend targets in the 4.5% to 5.5% range.