Accurate Valuation of China Stocks 65% Lower?
An article worth reading in its entirety, from Bloomberg:
China’s benchmark CSI 300 Index would need to fall as much as 54 percent to come in line with the price-to-earnings ratio of Hong Kong’s Hang Seng China Enterprises Index, which tracks shares of 41 mainland companies listed in the city. The CSI 300 would have to drop 65 percent to match the average multiple for Chinese shares traded in Singapore, according to calculations by Bloomberg.
Whatever “fair valuation” may be, other than the price people are generally willing to pay, a comparison between the Singapore and China stock indices — their companies experiencing very dissimilar economic prospects, not to mention the hoopla and ballyhoo for everything Chinese — does not seem especially relevant. More relevant is this: the ethereal nature of the financial statements issued by the average listed Chinese company and its widespread disregard by tens of millions of investors.
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