This also applies to the relative stock market performances so far this year.Ĭhina's blue chip equity index is down around 1% year to date, while the S&P 500 and Nasdaq are up 18% and 35%, respectively. Reversion to mean would see the current gap shrink to around 4.5 points, but past results are no guarantee of future outcomes. stocks have been at a consistent premium by this measure. In the past two decades, that only really flipped during the 2007-2009 Great Financial Crisis. equities are more expensive than Chinese stocks is nothing new. And that gap of almost 10 points has doubled in the past year. stocks are trading at 19.8 times 12-month forward earnings, almost twice China's 10 times multiple. and Chinese equity valuations is the widest since March last year, and one of the widest in over 20 years.Īccording to comparable MSCI data, U.S. But Chinese assets are underperforming for a reason. Those with a higher risk tolerance or belief that China will soon replace the United States as the world's most powerful economy may disagree. ORLANDO, Florida - Chinese stocks have traded at a discount to global peers for over a decade but have rarely been cheaper than they are now.īearing in mind the myriad risk premiums investors must consider when investing in China - regulatory, economic, exchange rate and political, to name a few - there's every chance they could get cheaper still. (The opinions expressed here are those of the author, a columnist for Reuters)
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