SINGAPORE (Nov 26): China-based stocks have been among the world’s worst performers this year, as fears of the US-China trade war and a cooling economy have hit stock prices hard.

Our investment in Nine Dragons Paper Holdings (NDP), China’s biggest manufacturer of paper packaging products, is no exception. But rather than a sharp fall in earnings, the stock is suffering from a severe P/E compression. This is fuelled in part by additional concerns over the Chinese government’s environmental restrictions imposed on the paper sector, which have severely restricted the import of scrap waste paper, the key raw material for recycled packaging paper. 

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