Just read some interesting figures on Hong Kong Economic Journal this afternoon. As of last friday: 1. Out of around 1500 stocks listed in Shanghi and Shenzhen, more than 370 have a P/E of 100; 716 have a P/E above 50 2. Since the year start, over 1000 stocks risen 50%; over 300 of them stocks risen 100% LOL, something like this might happen http://us.rd.yahoo.com/movies/clips...5&f=1809262865&mspid=1809823917&type=c&a=0,15
Someone on these boards the other day mentioned that they read the Chinese Government is owner of nearly 3/4 of the markets. If they don't want it to go down...it simply won't.
If they have the growth rate of over 50% to 100%, P/E is not high at all. All China stocks are growth stocks. You can't look at P/E. Do you know their PEG?
Blast, many of them are under local governments instead of the central government. So you need to look at local governements' ability to hold the prices during the next break. Beijing, Shanghi, Guangdong, maybe they can, rest of the country, I am not so sure. There are also stocks held by the Social Security Funds, and then some are held in Insurance Companies. Before any break, it's business as usual; but during a break, will the SOE go with government policies (wishes) instead of business? Your guess is as good as mine.
Aren't the locals just under command of the central government? I think the government can pump the stocks anytime they want by easing investment standards on pension and retirement funds which are now only capable of investing like 5% in the open market. I might be mistaken but there is a lot of money being held back due to investment restrictions from what I understand. I think the central government likes to have control. I don't expect the central government to let the market crash. Time will tell. Guessing, we're all just guessing.
They never want that, but it did happen in the past. The market is ok imo. There are several reasons for that: 1. currency speculation. Suppose you buy the stock at USD 1 now (around 8 yen now), if the yen goes up 10% next year, US investors will get a 10% return even the stock doesn't move. 2. if I want to bet on the currency appreciation, the easier way is to buy the chinese stocks. There is a influx of money supply to the china stock market. Stock price is a reflection of supply and demand. It never follows PE. BTW I don't trade China stocks.
Your point number 1 is great. Your point number 2 is questionable because of the amount of Chinese citizens who are buying stocks on credit. That's a scary reality...same as Americans buying homes with loans they can't afford. Once the performance slows/stops it all falls apart.
Yeah, we are all just guessing. If I am not mistaken, when a SOE goes public they would have to submit to the one of the Commerice department within the Central Governement, and in many case local governments would reduce ownership during the IPO; but reduction in ownership after the SOE is listed? What's the degree of freedom for the the local governments?