Showing posts with label Hang Seng. Show all posts
Showing posts with label Hang Seng. Show all posts

Friday 24 April 2015

Why Shanghai and Hong Kong are the world's cheapest sharemarket 'bubbles'

A 25 per cent surge in Hong Kong-listed shares has investors worried the market is running too hot.
A 25 per cent surge in Hong Kong-listed shares has investors worried the market is running too hot. Photo: Bloomberg
When the price of any market doubles in the space of 12 months (like the Shanghai Stock Exchange's benchmark index), or jumps by almost a quarter in a matter of weeks (like its Hong Kong equivalent), the temptation is to write them off in one word: "bubble".
But can a sharemarket trading on a price-to-earnings ratio of 10 be considered to be in a bubble? That's the Hong Kong-listed stocks in both the Hang Seng Index and the Hong Kong China Enterprises index.
If the answer is "yes", then Mammon help local investors who are ploughing money into the Australian sharemarket, which trades on a nose-bleeding forward P/E of 16.
Ah yes, you say, but look at the mainland Chinese sharemarkets. That's where the full weight of irrational exuberance is on display. The Shanghai Composite Index now trades at 18 times estimated earnings for this calendar year, on Bloomberg data. Once again, the move has been dramatic, but the resulting valuation less so. The Shanghai index is about the same as the S&P 500 index, but well below the multiple of 28 investors are paying for the US Russell 2000 index.
"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," Joseph Lai, who manages Platinum Investment Management's Asia Fund, says.
HSBC's head of Asia ex-Japan equity strategy Herald van der Linde doesn't see a bubble in Chinese shares, also pointing to valuations that have expanded fast but from very low levels. He remains "overweight" China, although he does add that some air might come out of the stocks that have run particularly hard.
"We like the financials sectors, banks and property companies, on the back of the lower interest rates we see in China," van der Linde says. "We also see infrastructure projects, such as those happening on the old silk road, benefiting infrastructure companies in China."

New money 

What has been particularly exercising pundits is the fact that the surges on the Shanghai and Shenzhen exchanges, and more recently in Hong Kong, are the result of a wave of new money from individual Chinese investors who look to be punting on a government-sanctioned boom in share prices, and often doing so on borrowed money.
"In our summer last year we started seeing in the Chinese media almost educational pieces encouraging mainland investors to get back into the sharemarket," Catherine Yeung, a Hong-Kong based investment director at Fidelity Worldwide Investment, says.
But this also needs to be put in context. After years of losing money, "mum and dad" investors in China had largely abandoned the sharemarket, often in favour of the property market. Exchanges in Shanghai, Shenzhen and Hong Kong essentially stagnated from late 2011 to 2014, as the chart shows.
Then in November the Chinese government announced reforms that made it easier for foreigners to invest in the Shanghai exchange and for mainlanders to buy Hong Kong-listed mainland businesses.
About the same time, policymakers began stepping up measures designed to stimulate a flagging economy. Chinese mums and dads began starting to take notice of the sharemarket, which was showing signs of life for the first time in years. They began to pile in.
The crescendo looks to have been reached in March, when retail Chinese investors opened about 4.2 million brokerage accounts, triple the number in February and taking the total number of new accounts this year to about 8 million. That's more than were opened in 2012 and 2013 combined, Fidelity's Yeung says.
A change of rules around Easter that gave Chinese mainland fund managers more access to Hong Kong-listed shares sparked a buying frenzy, as southbound money poured into the island's sharemarket and local investors jumped in to front-run the flow of money.

Daily turnover

The average daily turnover on the Hong Kong stock exchange tripled in short order, from an average of $HK87 billion ($14.47 billion) to $HK231 billion between April 8 and April 21.
More recently, regulators announced measures to rein in margin lending, which has been taken up enthusiastically by mainland investors.
"The ultimate aim of the government is to create a slow bull market rally," Yeung says. "It's very hard to change the behaviour of an investor who is set to go two ways – either a strong rally or sharp correction. That is the conundrum."
Lai says there has been some particular exuberance among Chinese small caps, but the larger names remain good value.
He points to a name like SAIC Motor Corporation, a joint venture between Volkswagen and General Motors and "a big company that sell millions of cars in China". The Hong Kong-listed stock is up 86 per cent over the past year, but trades on a P/E of 9.5. Or the giant China Mobile, which is the dominant mobile telco provider in China, with more than 800 million subscribers. It trades on eight times cash flow, Lai says, and that's after having jumped 65 per cent over the past 12 months.
A bet on China is also a bet that the government can continue to reform and rebalance the country's economy and steer it towards a more sustainable future.
"If economic reforms can continue to progress towards a more equitable and ecologically sound outcome, and the country can allocate capital better, then I think the market today is very cheap," Lai says. But he warns: "If the reform stalls, then we would have to reassess the market and our investment".


http://www.smh.com.au/business/markets/why-shanghai-and-hong-kong-are-the-worlds-cheapest-sharemarket-bubbles-20150423-1mr279.html

Tuesday 25 June 2013

The Shanghai Composite Index dived 5.2 per cent as volumes spiked to the highest. 15 CSI300 components plunged by the maximum-allowed 10 per cent.

China shares suffered their worst daily loss in almost four years on Monday, taking Hong Kong markets lower, with financials hammered on fears that the central bank would keep money tight and economic growth could slow sharply.
Despite money market rates easing for a second-straight session on Monday, mainland investors remained jittery about monetary conditions and braced for disappointment when the People's Bank of China conducts a scheduled open market operation on Tuesday.

The CSI300 of the top Shanghai and Shenzhen listings plunged 6.2 per cent. The Shanghai Composite Index dived 5.2 per cent as volumes spiked to the highest in about a month. Monday's losses were their worst since August 31, 2009.
The Hang Seng Index slid 2.2 per cent to 19,814 points, closing below the 20,000-point mark for the first time since September 11. The China Enterprises Index of the leading Chinese listings in Hong Kong tumbled 3.2 per cent to its lowest since October 2011.

At $US10 billion, Hong Kong turnover was off Friday's three-month high, but was still some 20 per cent more than its average in the last 20 sessions. Short selling accounted for 13.6 per cent of total turnover, versus the 8 per cent historical average.

Late Monday morning, share-losses accelerated in rising volumes after the Chinese central bank described liquidity in the country's financial system as "reasonable", repeating what was said in a Sunday commentary in the official Xinhua news agency.

The commentary also said the latest spike in money market rates was a result of market distortions caused by widespread speculative trading and shadow financing. The central bank, in its quarterly report on Sunday, pledged to "fine tune" existing "prudent" monetary policy.

"I think the market is expecting 'fine-tuning' to mean a tightening of liquidity moving forward, especially after the way official media talked about shadow financing over the weekend," said Cao Xuefeng, Chengdu-based head of research at Huaxi Securities.

"People are quite jittery ahead of the first of two (PBOC) open-market operations for the week on Tuesday. In this market environment, it's tough to call a bottom, fears could spread about funding for companies," Cao added.

The weakness in the mainland markets also extended to the property and other growth-sensitive sectors. A Xinhua report that 30.9 billion yuan of shares could become tradeable further weighed on markets, a move that may potentially compete for already tight liquidity.

Among CSI300 component stocks, only four finished the day with gains. Poly Real Estate and Southwest Securities were among 15 CSI300 components that plunged by the maximum-allowed 10 per cent.

Warren Buffett-backed Chinese automaker BYD plunged 11 per cent in Hong Kong after CLSA analysts repeated their sell call. They see its share price down 80 per cent from Monday's close, believing its new F3 sedan has been launched too late.

Banks hammered
Monday's plunge came despite the overnight repo rate, a key measure of funding costs in China's interbank market, falling by more than two percentage points to 6.64 per cent on a weighted-average basis, its lowest since last Tuesday. It had peaked near 12 per cent last Thursday.

Among the biggest losers were smaller banks seen as more reliant on short-term interbank funding. The Shanghai financial sub-index skidded 7.3 per cent in its worst day since November 2008, during the financial crisis that started that year.

Shanghai-listed China Minsheng Bank and Industrial Bank, along with Shenzhen-listed Ping An Bank all plunged by 10 per cent. Minsheng's Hong Kong listing skidded 8 per cent in its worst day since October 2011.

Minsheng shares, some of the most popular in both markets earlier this year, are now down 40 percent from a peak in January. They are down 19.4 per cent on the year, compared to the 22 per cent slide for the H-share index.

Among the "Big Four" Chinese banks listed in Hong Kong, Agricultural Bank of China (AgBank) and Industrial Bank of China (ICBC) had the biggest percentage losses, 2.9 and 3 per cent, respectively.

Reuters


Read more: http://www.smh.com.au/business/markets/worst-day-in-four-years-for-china-shares-20130624-2osyz.html#ixzz2XB05LY8W



Index Chart for SHCOMP

  • SHCOMP:IND 2,055.71

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Index Profile Information for SHCOMP

The Shanghai Stock Exchange Composite Index is a capitalization-weighted index. The index tracks the daily price performance of all A-shares and B-shares listedon the Shanghai Stock Exchange. The index was developed on December 19, 1990 with a base value of 100. Index trade volume on Q is scaled down by a factor of 1000.

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Thursday 4 November 2010

Hong Kong: Highest since June 2008 & SGX: Stocks end at 29-month high

Hong Kong: Highest since June 2008
Published: 2010/11/04

SHARES surged yesterday to levels not seen since before the 2008 financial crisis, helped by expectations of US economic stimulus and brimming confidence in China.

The benchmark Hang Seng Index rose 2.00 per cent, or 473.25 points.

The index is at its highest since June 2008, before the global financial crisis sent markets tumbling.

But Anthony Lam of Emperor Securities warned: "There is just too much hot money." - AFP



Read more: Hong Kong: Highest since June 2008 http://www.btimes.com.my/Current_News/BTIMES/articles/hkstoxnov4/Article/#ixzz14J5PVB4u



SGX: Stocks end at 29-month high
Published: 2010/11/04


STOCKS was up 0.80 per cent at a 29-month high of 3,230.93 yesterday afternoon. The Straits Times Index closed up 0.61 per cent, or 19.69 points, at 3,224.97.

Commodity firms Noble Group and Olam International gained over 1.5 per cent as investors turned bullish on the commodity sector, driven by expectations they will benefit from traditionally strong year-end demand. - Agencies



Read more: SGX: Stocks end at 29-month high http://www.btimes.com.my/Current_News/BTIMES/articles/sporestoxnov4/Article/#ixzz14J5jL8eP