How big was the China stock bubble?

by Chris Becker

Predictions continue to be hard to make about the future, but there is no doubt that the most recent run up in Chinese equity prices was (is?) a bubble.

And here’s another nail in the coffin to the “its all over” thesis. From Research Affiliates, via history squared, comes this chart tracking the monthly trailing price/earnings (P/E) ratio of the NASDAQ in 2000, the Nikkei 225 in 1989 and the Shanghai Composite currently:

trailingperatios

The outcome for Japanese and equities and the NASDAQ Composite was an epic slump, the latter losing over 80% in value:

$iuxx_us_price_monthly.03sep96_to_12may04

Chinese authorities intervened in the market yesterday, dragging the bourse up again by over 1% but this is a losing battle.

Latest posts by Chris Becker (see all)

Comments

  1. Josh MoorreesMEMBER

    I wonder what Chinese companies who are ‘lucky’ enough to be the tool by which the NT pulls the market up think of it? There was that Bloomberg piece which showed that companies with a large state owned portion from the bailout significantly underperformed the broader market once it was announced.