Chinese stocks are oversold and will outperform by 5 percent over the next three months, says Helen Zhu, chief China strategist at Goldman Sachs.

Cooling factory output and other data have sent Chinese shares falling in recent months to the point they represent a very attractive buy, especially compared to other markets.

"Expectations towards Chinese equities have fallen pretty significantly over the last 12-24 months,” Zhu tells CNBC.

"Starting from the fourth quarter of 2010, China’s relative valuation versus Asia, versus emerging markets and versus the world has really widened. We have seen a 20-to-25 percent de-rating relative to other global markets."

Stocks in financial institutions and in cyclical industries like retail and cement represent particularly good opportunities.

"The very prevailing trend in the recent past has been that people have shunned macro sensitive sectors … many of them trade at trough valuations well below 2008 financial crisis levels," says Zhu.

China's manufacturing sector contracted for the seventh consecutive month in May thanks to falling demand abroad.

The HSBC preliminary purchasing managers index fell to 48.7 in May from 49.3 in April, and experts expect the People's Bank of China to stimulate the economy to spur more growth, which could send stock prices rising.

"This calls for more aggressive policy easing, as inflation continues to slow. Beijing policy makers have been and will step up easing efforts to stabilize growth," says HSBC's chief economist for China, Qu Hongbin, according to the AFP newswire.

"As long as the easing measures filter through, China will secure a soft landing in the coming quarters."