PE for the Shanghai stock market----some similarities to XIN
Good post, KSN.
I can add two other pieces of data to compare to Shanghai's 9.6 P/E. As of right now, Nasdaq's average P/E is 19 and the NYSE's is 16.4.
The discount on the Chinese exchanges is partially due to the high frequency of Chinese frauds, so we shouldn't expect that gap will ever completely close, but the gap might still be bigger than it should be, owing to China stocks' poor reputations in the west.
It's an easy thing to forget, but the SEC's superior reporting and policing abilities keep all of our stocks' prices higher than if the exact same companies listed somewhere else.
hmmmm.....I am not sure Shanghai's stock market performance has any FRAUD relevance to any Chinese stocks listed here, not trying to be a smart #$%$, I just don't think there is a connection. Now is there a connection as to how US-listed Chinese stocks perform IN GENERAL in relation to how Shanghai performs? I have to think a resounding YES. Particularly those in RE which as you know is under the long arm of the Chinese law and will be for quite some time to come.
Right now Shanghai's stock market flat out sucks, as has sucked for three years. After a buffo performance today in the US, half way through their day and Shanghai is down right now. This is like a lead balloon, in my opinion, on XIN's price performance.
Again, and I have beaten this to death, the complex question of allowing their economy to grow while at the same time suppressing RE is a hard one to figure. I certainly do not know the way around it, but, er, perhaps China does. For my part I hope they can figure it out.
I belief the low sp is an reflection of
Reputation of Chinese stock
Reputation of china construction
Long term downtrend of xin due to sell of makpjor shareholder
The tide will slowly turn and once we have an up trend, the momentum traders will join
1. KSN, I only meant to point out that one of the reasons Chinese markets' P/E's are lower than ours is because the SEC has more effective reporting and disclosure requirements than foreign versions of the SEC, so some amount of gap between our P/E's and foreign exchanges' is always to be expected.
Heh, I didn't think you were crackin' wise!
2. I tried the following experiment to test out whether US listed China stocks better correlate with the HK market (I couldn't figure out how to make Yahoo show me Shanghai) or the Nasdaq. Results were split: for a 1 year chart, HK seems the better indicator. Over a 2 yr period, it's closer. Here's what I tried:
I opened a chart of BIDU, then "compare" and clicked the Nasdaq and added HK (type in "hsi" and choose Hang Seng from drop down menu). Then I ran 1 and 2 yr charts. Over the one year time span, I def think HK's our winner; over 2 yrs it's closer.
To give a broader industry perspective, I added CHL, China's mega cell phone provider, and PTR, its mega oil company, to the chart and re-ran 1 and 2 year comparison charts. I thought the results were more or less in line with the Bidu-only results.
When I tried adding XIN to the charts above, it didn't really seem to correlate well with anything at all. XIN seems to do its own thing in its own time.
3. Good point on the real estate industry, though. Your logic seems sound. There's just not enough US listed Chinese RE development companies (really, just XIN and CHLN) to get a decent cross section to test.
4. I also like your point about the conflict between suppressing RE while still growing China's economy, but economics is a field I know very little about. I'll think about it, though.
I wonder if the new leadership will change anything. I thought it was odd that Chinese markets didn't seem to react at all to such a monumental change (the Politburo retired 7 of its 9 members, while the other two became the new Prez and "Veep"). That seems like a lot of change to me.
Interesting idea but a theory with a definite answer - What is the beta for Shanghai? If it is near 1 with a small r-squared that would be an intriguing result. Depending on the r-squared that might tease out a Chinese-Mainland institution investor who is not disclosing. This stock, as all Chinese stock, are subject to manipulations not allowed since the turn of last century. If there are Chinese institutionals not disclosing, it just another reason for steep risk discounting on Chinese listings.
XIN is just an extension of a government monopoly. As such, its valuation is rational. On the other hand, the valuation might hide undisclosed trading practices.