Bloomberg: U.S. Dot-Com Bubble Was Nothing Compared to Today’s China Prices

[corydorus]

Scary Read.

Well, an alternative way to make the Index figure looks good is to devalue ... Yuan ... instead.

"Chinese equity valuations are still among the most expensive in the world. The median stock on mainland bourses traded at 72 times reported earnings on Monday, higher than any of the 10 largest markets. It was 68 at the peak of China’s equity bubble in 2007, according to data compiled by Bloomberg."

[CityFarmer]

There are conflicting reports on China stock market valuation. On one side, fund managers are saying low valuation, while some reports are saying over-valuation. Which is which?

I reckon, one is referring to Shanghai Ex, while the other one is referring to Shenzhen Ex. Shanghai Ex average PE is 18.62, while Shenzhen Ex PE is 49.23, after the recent dive.

Depending on the story line needed, one of them has been chosen, I guess.

Shenzhen Ex
http://www.szse.cn/main/en/MarketStatist...tOverview/

Shanghai Ex
http://english.sse.com.cn/

[greengiraffe]

Chinese stocks look cheap but investors question the value
DateAugust 21, 2015 - 3:45PM

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Rose Powell
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While Chinese stocks look cheaper, some professional investors are hesitant to call them good value. Photo: Reuters

Hong Kong shares may be the cheapest they've been in 12 years but professional investors remain wary as they question if the Chinese government's intervention is the only thing holding the Chinese share prices up.
The benchmark Hang Seng index has fallen 16 per cent this year, but has been incredibly volatile. The index forged 30 per cent higher between March and May, only to suffer a nasty reversal, slumping by a third.
The past week has also been marked by heavy volatility, as early session falls were offset by late rallies. Analysts have pointed to margin calls accelerating the initial losses, with the government then stepping in to provide a steadying hand.
The spectre of official intervention to stem losses has sparked concerns any gains are short-term and even illusory.
So while Chinese stocks look cheaper, some professional investors are hesitant to call them good value. The MSCI China index trades on 9.8 times reported earnings, which is almost half the value ascribed to the All-Country World Index.
The share indices are now in what is described as a "death cross", which is formed when the 50-day price average crosses below the 200-day average and indicates the recent falls could signal a long-term period of lower shares.
The key question for analysts is how long Chinese authorities can and will continue to prop the stock market up.
The fact Beijing felt compelled to intervene pointed to a much bigger issue, PM Capital's Asian portfolio manager, Kevin Bertoli, said, one that made him wary of investing in China.
"It's not a rational market place and that makes it much more dramatic and harder to gauge," Mr Bertoli said.
"Even the situation where the government helps the market fix itself has the same negative starting principle: the economic environment is weak and everything the government has done so far to fix the fundamentals hasn't worked."
The weakening economy and sharemarket woes could be causing a reverse wealth effect, Mr Bertoli said, pointing to data that shows automobile and smartphone sales are down in the second half of this year for the first time in a decade.
Mr Bertoli said his funds had scope to take up to about 30 Chinese stocks, but had fewer than 10 at the moment. Rather than bring more on board, he is keeping about 30 per cent of the fund's available capital in cash as he waits for the right price to invest.
"What investors need to do is be very patient about when they buy into companies as stocks can fluctuate 30 per cent or so in weeks, even businesses where the fundamentals are strong," Mr Bertoli said.
Fidelity investment director for Asian ex-Japan equities Catherine Yeung said they were expecting more volatility but hadn't changed the positioning of their funds. Ms Yeung said she was anticipating the market would recover as Chinese authorities launch a range of fiscal policies over the coming months.
"The aim of the regulators is to diversify the investor base and particularly to attract more foreign investors as they have a longer term investment horizon and favour blue chip stocks," Ms Yeung said.
Ms Yeung said Chinese retail investors favour soaring small cap stocks and can wreak real damage on companies and the market as they often have an investment horizon as short as a week long, causing many to cash out after significant gains and bring the stock crashing back down.
She added she understood the anxiety of the many institutional shareholders waiting on the sidelines and concedes periods of intense volatility will continue for some time.
"There is nervousness in the market in terms of the investor risk and sentiment. But we were far more nervous as when the market was soaring because so much of that was driven by domestic retail investors. Had the market just corrected to its own natural level, we could have seen more institutional investors come in for then for the attractive valuations."

[BlueKelah]

As china economy contracts, earnings will topple and suddenly PE will look so high and market will look so expensive.

Besides can really trust china company reported earnings??

Gov intervention will be futile when the underlying fundamentals are going to the ground. Dem commies are the last ones we should trust...





sent from my Galaxy Tab S

[corydorus]

I got this feeling is going to burst. This is not sustainable. I hope we will not be implicated when it does.

I got this feeling is going to burst. This is not sustainable. I hope we will not be implicated when it does.

Up to the latest info, the HKEX's average PE is 12.5, and the respective B-Share PE for Shanghai and Shenzhen Exchanges are 21.6 and 16.0 respectively.

Bubble? probably not yet. Going to become one? May be, and still need more time to reach the boundary. May be as Mr. specuvestor estimation, 1.5 years down the road...

Source: http://www.hkex.com.hk/eng/csm/highlight...angCode=en

My Feeling Won  ?  

I am not sure. One month ago at peak, I might feel winning, but now you won. How about few months later?

IMO, bubble or not, should be concluded from fundamentals. If market PE >30, it is a bubble, even after -30+% correction, tio bu?

Just watch the drama... free show and we can be wiser... no complains... beyond every crisis, there will be more solutions and more problems...

Unfortunately we are implicated by China. With World market beaten up by China slow down. My worst fear is here ...

[BlueKelah]

If u are cashed up u will be fine. Hunting season officially open...

sent from my Galaxy Tab S

[weijian]

If u are cashed up u will be fine. Hunting season officially open...

sent from my Galaxy Tab S

Over the years, WB has used many vivid terms to describe this situation:

The more recent one: loading up the elephant gun
The older classics: kid in a candy store, over-XXXed teen in a wXXXe house

In his words as well, for some of us whom bought call options (aka CASH) all this time, is it time to exercise the option now?

[greengiraffe]

If u are cashed up u will be fine. Hunting season officially open...

sent from my Galaxy Tab S

talk is free

[BlueKelah]

If u are cashed up u will be fine. Hunting season officially open...

sent from my Galaxy Tab S

Over the years, WB has used many vivid terms to describe this situation:

The more recent one: loading up the elephant gun
The older classics: kid in a candy store, over-XXXed teen in a wXXXe house

In his words as well, for some of us whom bought call options (aka CASH) all this time, is it time to exercise the option now?

its hard to call a time, but would say it is time to start hunting. though officially the guru buffett has been selling his energy companies and going into cash. So far he is only shooting one aerospace elephant for $30+billion so maybe things are not so cheap yet. Probably when he starts shooting a lot more it could be an indicator things are cheap and we can join in a much bigger fashion too.

I do think winter is finally come around for SGX and we can start stocking up on straw hats (this one not WB saying )

[Bibi]

If u are cashed up u will be fine. Hunting season officially open...

sent from my Galaxy Tab S

Over the years, WB has used many vivid terms to describe this situation:

The more recent one: loading up the elephant gun
The older classics: kid in a candy store, over-XXXed teen in a wXXXe house

In his words as well, for some of us whom bought call options (aka CASH) all this time, is it time to exercise the option now?

Tan Teng Boo, the guy full of white hair in the value buddies' advertising banner above, is sometimes quoted as Warren Buffet of the East by some pp. He say he will only be interested in KepCorp at S$3.50 and below. O&G counters have drop so much yet KepCorp is still way above $3.50. So do you think its time to load the elephant gun?