(Bloomberg) -- HSBC Holdings Plc analysts upgraded their call on Chinese stocks to overweight, saying investors had become too bearish on a market that now offers value in real estate, industrials, healthcare and some banks.

“We think the baby is being thrown out with the bathwater,” Herald van der Linde, the bank’s head of equity strategy for Asia Pacific and colleagues wrote in a note dated Tuesday. “Yes, China is struggling with growth and a stronger U.S. dollar is not good news for China’s stock markets. But that’s now well-known and is priced in.”

Read: BlackRock, UBS Turning Into China Stock Bulls as Fears Ease

With the Communist Party’s twice-a-decade congress looming next year, there is a likelihood of more targeted measures to ensure growth, according to HSBC. Yet mutual funds are now underweight Chinese stocks from both a global and regional perspective, they said.

While regulatory crackdowns and the crisis at China Evergrande Group are grabbing headlines, HSBC is paying attention to the market’s 12-month price-earnings ratio, which it sees at 12.9 times versus 17 times at the start of the year. 

“China is not expensive,” they said. “China has never been this cheap versus India -- FTSE India is now trading at a premium of 95% to China, a record high.”

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