The Shanghai index has fallen more than 30% since its recent peak in August last year. Enough already, says Aaron Boesky, chief executive of Marco Polo Pure Investments in Hong Kong, who has made what he claims to be his most high-conviction call ever that this is a market bottom.

So, Aaron Boesky, what are you calling?

We're calling a bottom in July 2010, and think we're accurate on this call. The reasons being that Shanghai is near the lowest valuation level in history and at the same time is seeing very strong fundamental strength both in profits and in the general economy. It has wrongfully been punished and has been the worst-performing market in the world this year, ex-Greece.

Price/earnings ratios have come down from 72 in 2007 to 12 in 2010. That is close to 20-year lows. With profits estimated up at 25% growth for 2010 and an estimate of 30% here at Marco Polo for 2011, this market is due for a huge rebound.

And here is a section on the slowdown in China and Boesky's targets through 2012:

But statistics show deceleration in services and manufacturing.

[That represents] deceleration from artificially high numbers due to the amount of loans that went out during the crisis as GDP reached an unsustainable 12%. We are pleased to see the economy coming back in line with very healthy growth targets around 8% plus for GDP.

Look, 25-30% earnings growth this year in the market and possibly 30% or more next year, and we will have a P/E valuation that has literally never been seen in this market. It's a screaming buy and money will come out of real estate and back into the stock market by the end of this summer in our view.

A lot has been said about high IPO issuance among the banks and a soaking-up of liquidity, with about $40 billion being raised. Our thesis is that this money raised by the banks will be re-lent after reserve ratios of 12% are satisfied.

With the benefit of [that figure] being magnified and levered up and being recirculated in the economy, we are looking at that same $40 billion raised by the Chinese banks translating into $200 billion lent back into the system in the next 12 months in addition to what is already being put out there.

Chinese banks raising capital is a clear indication that they are gearing up for a credit expansion, and this also feeds into our 2011 call for profit growth.

So what's your call for the Shanghai index level for the end of the year?

Our call and belief is to see the Shanghai A-share index break 3,500 points this year, and all-time highs over 6,000 points by the end of 2012.

David Fuller's view OK, Aaron Boesky is a Hong Kong based investment manager with funds in the Shanghai A-Share market. Consequently, we can expect him to be optimistic more often than not and any negative feelings will be withheld or watered down so not to offend Chinese government officials who could make life difficult for him.

Nevertheless I find his valuation argument compelling - the world's fastest growing economy is selling on future multiples which are competitive with those in the slow-growth West. One does not have to be a catastrophist to question forward earnings estimates so I have reproduced this chart of historic earnings for the Shanghai A-Shares Index, reported by Bloomberg. The current, historic PER is just under 18 and falling as earnings increase and the stock market drifts. Similar PERs in 2005 and 2008 were followed by substantial gains, as we know.

I think Boesky may be underplaying the IPO influence - recent and pending, in this interview. Also, charts of the Shanghai A-Shares Index (weekly & daily) have yet to show clear evidence of recovery, as we saw in 2006 and early 2009. However in returning to the first step above the base, it has declined to the upper side of a region which I would expect to cushion downside risk and eventually support a medium-term recovery.

Chart dynamics can change quickly, as we know. A spike to the upside relative to the four minimal attempts to recover, evident from the four blue weekly candles on the way down since April, would be a good indication that a sustainable reaction low had been reached. We may also see a rounding pattern which would take more time. Either way, and whether or not one anticipates or waits for technical evidence that the next sustainable low has occurred, I think China's medium to longer-term upside scope is more promising than that of any debt-ridden western country stock market.