Bourses in China eclipse all of Asia

[touchring]

If they flip stocks, they will flip domains.



http://www.ft.com/cms/s/f2279236-fe5...b5df10621.html


Bourses in China eclipse all of Asia

By Jamil Anderlini in Hong Kong

Published: May 9 2007 22:02 | Last updated: May 10 2007 08:53

The value of shares traded on China’s stock markets on Wednesday was greater than the rest of Asia combined – including Japan – helping the benchmark index to breach the 4,000 mark for the first time.

Analysts said this was almost certainly the first time that turnover at the Chinese bourses had exceeded that of the rest of Asia.

The stocks extended their strong gains on Thursday despite growing concerns over asset bubbles, with the Shanghai Composite Index rising another 0.9 per cent to end at 4,049.7. Trading volumes remained heavy, with Rmb204.3bn ($26.5bn) A shares changing hands, but moved at a slightly slower pace than on Wednesday.

The Shanghai stock exchange recorded Rmb255.3bn in turnover on Wednesday, while the smaller Shenzhen exchange saw Rmb121.6bn worth of shares change hands, bringing the combined total for the mainland Chinese market to Rmb376.9bn – 21 per cent higher than the previous record set at the end of April.

As recently as March 30, trading volume on the Chinese markets was $16.4bn, while six months ago it was only $5bn a day.

The huge increase is a result of revived retail interest in a market that has climbed 300 per cent in less than two years and continues to defy gravity, in spite of government moves to talk it down.

Wednesday’s figure of $49bn was nearly double Japan’s $26.9bn turnover, and triple the $16.5bn combined trading volume of Australia, Hong Kong, Thailand, Singapore, Malaysia, Korea, India, Taiwan, Indonesia, New Zealand and Vietnam. It was still less than half Tuesday’s $122bn trading volume in the US, but well above London’s $29.4bn on Tuesday.

The huge jump in trading volume helped push the benchmark Shanghai Composite Index up 1.6 per cent to close Wednesday at 4,013.09, less than two months after it passed the 3,000 mark.

The record turnover was all the more impressive given that day trading is not allowed in China.

“Since the start of the year we’ve seen a surge of retail money flow into the market, and with 300,000 stock accounts being opened every day we will definitely see turnover increase more in the coming weeks,” said Isaac Meng, an analyst at BNP Paribas.

After such a sustained bull run even the most sober-minded are saying the market can continue to rise in spite of prices that are more than 50 times earnings.

One reason is the Rmb20,000bn or so in personal financial assets held by individuals in low-yielding bonds and bank accounts earning less than 3 per cent interest.

With inflation now above 3 per cent in China, negative real returns offered by bank deposits are helping fuel the stock frenzy.

“Investors will continue to take their money out of low-yielding assets and into the stock market, and that will continue to exacerbate a supply and demand imbalance in the market, which leads to inflated prices,” Mr Meng said.

While the Chinese market is now the world’s second-largest in terms of turnover, it is still less than half the size of Japan’s in terms of market capitalisation, with Shenzhen and Shanghai boasting a combined $2,200bn compared to Japan’s $4,700bn, the UK’s near-$4,000bn and the US’s $16,500bn. The main beneficiaries are China’s previously bankrupt securities brokerages, many of which had to be bailed out by the government only two years ago.

Copyright The Financial Times Limited 2007

[clipper]

Originally Posted by touchring

If the stock market can grow at 50% a year, how can the economic growth be only 10%?

Originally Posted by ft

After such a sustained bull run even the most sober-minded are saying the market can continue to rise in spite of prices that are more than 50 times earnings.

That's how. Markets are ruled by sentiment, and are thus "irrational," or "speculative," depending on your perspective.

Well, that, and the personal accounts that are earning less than inflation will do it.

[touchring]

Originally Posted by clipper

That's how. Markets are ruled by sentiment, and are thus "irrational," or "speculative," depending on your perspective.

Well, that, and the personal accounts that are earning less than inflation will do it.

Boom and bust, part of life. if there's boom, there will be bust. But without boom, there will be no bust, and also no boom.

The volume is scary if you consider that 1 pound in the UK buys 10 to 20 pounds worth of goods in China.

Originally Posted by clipper

After such a sustained bull run even the most sober-minded are saying the market can continue to rise in spite of prices that are more than 50 times earnings.

Dot com prices are at 100 times earnings, so another 100% appreciation to go!

[Rubber Duck]

Of course it seems irrational as we have no rational way of measuring these things.

Chinese freed up private sector foreign investment. That means that Chinese can invest on World Markets for the first time (Companies not individuals). However, that means that they will now be benchmarking investments in China with those elsewhere. Who knows perhaps California is starting to look cheap?

[yanni]

Originally Posted by touchring

Dot com prices are at 100 times earnings, so another 100% appreciation to go!

No they're not.

Once domain owners realize what a single click's potential worth is to a businessman, you'll really see prices skyrocket.

A domain is a worker who works restlessly for you day and night, 365, who can bring million dollar sales on a consistent basis, and your only expense is $6.95 a year.

Actual worth? Priceless, when you consider you actually own a minting press for peanuts.

[Drewbert]

And POTM goes to Yanni!