(Bloomberg) -- Chinese stocks have become cheap after their recent declines, but that isn’t enough to lure buyers who have more attractive options in South Korea and Taiwan, according to a Schroders Plc money manager.

The slowing momentum in China’s economy has damped its appeal as an investment destination, especially in an environment where the rest of the world is holding up well, said Keiko Kondo, head of multi-asset investments Asia for Schroder Investment Management. The tech-driven equity rally in South Korea and Taiwan has laid the foundation for a broader upswing across sectors, she added.

“If the rest of the world was weaker and going into recession and China was stronger, that would become much easier to look at these stocks,” said Kondo, referring to Chinese shares. “Given the underperformance, Chinese equities do look cheaper on valuation, but being cheap is not enough. You need other catalysts to be buying.”

China’s CSI 300 Index commands a price to estimated earnings of 11, below its average for the past decade and trailing the ratio for Taiwan benchmark gauge.

Risk-free Treasury yields around 5% at the short end of the curve are one factor that reduces the need to load up on risky credit to drive returns, Kondo said. She favors quality credit in Schroders’ multi-asset portfolios and has avoided Chinese property developers despite the high yields.

Strident policy support may lure long-term investors quickly back into Chinese stocks, but for now, Kondo sees activity dominated by hedge funds pursuing near-term tactical trades.

“We’re not saying China growth won’t come up but until we start to see actual actions through policy that is likely to translate to the broadening of the recovery then we are quite comfortable,” to be neutral on China, she said.

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