econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 26 May 2015

China's Markets Reach Seven-Year High

Written by , GEI Associate

China shares hit the seven-year high, despite recent poor economic indicators such as the disappointing PMI. For the week ended May 22, the Shenzhen Composite gained 12.21 percent, its best weekly performance since 2008; and the Shanghai Composite Index also gained 8.9 percent, to 4,657.60 points.

SHCOMP:

SZCOMP:

Liquidity is one main driver of the market rise. Real estate used to be a favorite investment option for Chinese. But the tepid performance of the property market has led people to plow their savings into equities. Also boosting the stock market, PBOC (Peoples Bank of China) has cut interest rates and the reserve requirement ratio (RRR) five times in last six months. There are also expectations for further rate cuts and reductions in RRR this year. The aggressive monetary easing injects liquidity and drives the bull market.

Government also plays an important role in this market rise. Unlike stock markets in other countries, the Chinese stock market has always been policy-driven. As China's economic growth is slowing down, the market rise can make people feel rich and thus spend more, channeling liquidity to the real economy. In other words, the rising markets would create a "wealth effect" and boost the overall economy. As a result, the Chinese government has additionally facilitated the market by cutting trading fees. It has also encouraged stock investments through official media. The government is trying to use this wealth effect of the stock market to stimulate the economy.

Moreover, despite the boom, Chinese stocks are undervalued at the current P/E. According to the Sydney Morning Herald, the Shanghai Composite Index currently trades at 18 times estimated earnings for 2015, around the same level as the U.S. S&P 500 index, but well below the multiple of 28 investors are paying for the US Russell 2000 index. As Joseph Lai, who manages Platinum Investment Management's Asia Fund, says:

"On an absolute basis, the valuations of these markets are not expensive, nor are they if you benchmark their P/Es against the US, Japan, Australia, or even Europe."

Therefore, China's stock market is relatively cheap. It still has potential for further growth if the economic reforms can continue.

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.




Econintersect Contributors


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
The Job Guarantee, Wage-Price Inflation And Alternative Solutions: Part 1
The Job Guarantee, Wage-Price Inflation And Alternative Solutions: Part 2
News Blog
How Taxes And Transfers Affect The Work Incentives Of People With Low And Moderate Income
How Tourism Affects China's Current Account Surplus
Infographic Of The Day: The Habits Of Highly Successful Entrepreneurs
To Where The Maple Syrup Flows
The U.S. Has The Most Expensive Healthcare System In The World
Five Maps That Will Change How You See The World
What We Read Today 16 March 2017 - Special Public Edition
Hate Groups In The U.S. Are Flourishing
What We Read Today 23 March 2017
March 2017 Kansas City Fed Manufacturing At Highest Level Since March 2011
February 2017 Headline New Home Sales Improve and Above Expectations
18 March 2017 Initial Unemployment Claims Rolling Average Again Worsens
Get Around Baggage Check Fees With This Luggage Jacket
Investing Blog
Early Headlines: Asia Stocks Mixed, Dollar, Oil Up, Gold Down, Health Care Vote Today, Calif. Solar, Russia And Poison, Mumbai Bridge, Sanctions Cause Suffering In N. Korea, And More
Tesla Is Playing The Long Game
Opinion Blog
Time To Stop Rewarding Economists For Bad Behaviour
The American Dream: An Endangered Ethos
Precious Metals Blog
These Gold Stocks Will Produce Much Bigger Gains Than Gold Itself
Live Markets
23Mar2017 Market Close: Stocks Reversed Lower After GOP Health Worsened, Gold And Oil Followed Stocks But Dollar Rallied
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government































 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved