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Guo Shiliang: After the 30% increase, is the Chinese stock market cheap or expensive?

April 15, 2019 09:45
source: Fortune Guo Shiliang Finance Review

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Summary
[Guo Shiliang: After the increase of 30%, is the Chinese stock market cheap or expensive? As of the close of April 12 this year, the Shanghai Composite Index has increased by 27.86% this year, while the Shenzhen Stock Exchange Index has increased by 39.95%. As for the SME Index and the GEM Index, they recorded 36.32% and 35.60% of the year's gains respectively. After the stock market's sharp rise in the first quarter of this year, after the overall increase of about 30%, the Chinese stock market still has no investment value, and the Chinese stock market after the big rise is cheap or expensive?


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As of the close of April 12 this year,The Shanghai Composite IndexThis year's increase was 27.86%, andShenzhen Stock ExchangeThe year-on-year increase was 39.95%. As for the small and medium board index andGEMThe number recorded a year-on-year increase of 36.32% and 35.60% respectively. Compared with this, the US stock market Dow Jones index has increased by 13.22% this year.NasdaqThe index rose 20.33% during the year, while Hong Kong stocksHang Seng IndexIt recorded a 15.72% increase in the year. It can be seen that for the performance of the global stock market this year, the Chinese stock market has rarely outperformed the global market and became one of the markets with obvious growth during the year.

In 2019, for the Chinese stock market, it is also an important year for the trend to reverse. In fact, just in early January of this year, China’s stock market was still in a very sluggish state of operation. However, after the stock market’s sharp rise in the first quarter of this year, the overall increase of about 30%, the Chinese stock market still has no investment value, and after the big rise Is the Chinese stock market cheap or expensive?

As of the close of April 12, the average P/E ratio of the Shanghai Composite Index was 15.98 times, and the overall average P/E ratio of Shenzhen Stock Exchange was 26.04 times. However, for the Shenzhen stock market, its average price-to-earnings ratio is 18.69 times, still significantly lower than the average price-earnings ratio of the small and medium-sized board and the ChiNext market.

It is undeniable that compared with the average P/E ratio corresponding to the stock market low at the beginning of this year, the valuation of the A-share market has rebounded significantly, and after nearly 30% of this year's increase, the A-share market is cheap. The degree and valuation advantage is also significantly lower than the low level at the beginning of this year. However, looking at the average valuation of the history of the A-share market, the average price-to-earnings ratio of 15.98 times in Shanghai stock market and 18.69 times in Shenzhen stock market is not very expensive.

Among them, taking the Shanghai market as an example, in recent years, its average price-earnings ratio is basically in the bottom region, but it is largely affected by the long-term low valuation factors of super-weight stocks. For the current average P/E ratio of 15.98 times, it has basically returned to the middle of last year. In the extremely depressed market environment in January this year, the average P/E ratio of the Shanghai stock market is only about 12 or 13 times, and today's stock market average. The P/E ratio is also a sign of a moderate recovery, but it is still not a phenomenon of rapid valuation.

However, compared with the average P/E ratio of the Shanghai stock market, the average price-earnings ratio of the Shenzhen market is significantly larger. Among them, since the high point adjustment in 2015, the average P/E ratio of Shenzhen Stock Market has shown signs of rapid shrinkage, and its peak valuation has reached 5, 60 times. However, after years of vigorous deleveraging and de-foaming, the Shenzhen P/E ratio has been significantly reduced, and it has fallen to an average P/E ratio of less than 20 times. Today, the average valuation of Shenzhen City's 26.04 times is also more than 30% higher than the lowest point of this year's valuation, but it is still in the bottom of the valuation of the A-share market in recent years.

From the analysis of the average valuation of the global stock market, the Hong Kong stock market still holds a certain valuation advantage. In contrast, for the A-share market, although the overall valuation is slightly higher than the Hong Kong stock market, it is appropriate.SSE 50The index, the average valuation level is also very close to the average valuation of the Hong Kong stock market. To put it another way, it is precisely because the weight index represented by the above 50 is in a state of historical low valuation, which often suppresses the average valuation of the A-share market to a certain extent, and the average valuation of the A-share market in recent years. The value, especially the average valuation of the Shanghai stock market, is gradually approaching mature markets such as the Hong Kong stock market. However, for the average valuation of the A-share market and the Hong Kong stock market, it still holds a certain valuation advantage in the global market.

Since the rebound at the beginning of this year, the cumulative increase in the A-share market has reached about 30%, and the corresponding valuation has also rebounded. However, for the stock market rise in the first four months of this year, it is more likely to be defined as a rational repair of the A-share valuation, which also prompted the valuation of the A-share market to be too low to gradually return to a relatively reasonable valuation, and gradually reflected The face of domestic economic development.

It is worth mentioning that even if there is a clear rebound in the stock market and the average valuation of the stock market has rebounded, there are still some important positive factors for the A-share market, such as the acceleration of tax reduction and fee reduction measures. Landing, external market environment and the gradual warming of the policy environment. In addition, for some listed companies, due to the excessive reaction of goodwill impairment at the beginning and the beginning of the year, the risk of significant impairment of goodwill was released in advance, but it was for the next few years.PerformanceThe rebound has created favorable conditions, which in turn has accelerated the recovery of stock prices.

The average price-to-earnings ratio of 15.98 times in Shanghai stock market and the average valuation level of 26.04 times in Shenzhen stock market do not have much valuation advantage compared with the Hong Kong stock market. However, in the historical environment of the A-share market, this valuation status is still in the region at the bottom of the historical valuation. However, for the future investment value of the A-share market and the market recovery space, it is still necessary to look at the overall profit growth ability of listed companies and the sustained release of the policy dividend, and the effect of the tax reduction and fee reduction reform on the performance of listed companies. , still to be reflected, but this has a certain positive impact on the medium and long-term performance of the A-share market.

(Article source: Fortune Guo Shiliang Finance Review)

                (Editor: DF358)

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