Buffett backs value investing amid frenzy in China

United States investment guru Warren Buffett has responded to the frenzy in China's A-share market by defending value investing.

Value investors seek stocks of companies that they believe the market has undervalued. They consider the market overreacts to good and bad news, resulting in stock price movements that do not correspond with a company's long-term fundamentals. The result is an opportunity for such investors to profit by buying when the price is deflated.

Buffett defended the strategy at his company's annual shareholders' meeting during the weekend. The 84-year-old chairman and chief executive of multinational conglomerate holding company Berkshire Hathaway said value investing applies to all markets, although he sees greater speculative forces in the Chinese market.