U.S. Dot-Com Bubble Was Nothing Compared to Today’s China Prices

[Amati75]

The world-beating surge in Chinese technology stocks is making the heady days of the dot-com bubble look tame by comparison.
The industry is leading gains in China’s $6.9 trillion stock market, sending valuations to an average 220 times reported profits, the most expensive level among global peers. When the Nasdaq Composite Index peaked in March 2000, technology companies in the U.S. had a mean price-to-earnings ratio of 156.
Like the rise of the Internet two decades ago, China’s technology shares are being fueled by a compelling story: the ruling Communist Party is promoting the industry to wean Asia’s biggest economy from its reliance on heavy manufacturing and property development. In an echo of the late 1990s, Chinese stocks are also gaining support from lower interest rates, a boom in initial public offerings and an influx of money from novice investors.

The good news is the technology sector makes up a smaller portion of China’s equity market than it did in the U.S. 15 years ago, limiting the potential fallout from a selloff. The bad news is that any reversal in the industry will saddle individual investors with losses and risk putting an end to the Shanghai Composite Index’s rally to a seven-year high.
“Chinese technology stocks do resemble the dot-com bubble,” Vincent Chan, the Hong Kong-based head of China research at Credit Suisse Group AG, Switzerland’s second-biggest bank, said in an interview on April 2. “Given stocks fell 50 to 70 percent when that bubble burst in 2000, these small-cap Chinese shares may face big corrections when this one deflates.”
Internet Plus

China’s government is boosting spending on science and technology as a faltering industrial sector drags down economic growth to the weakest pace in 25 years. In March, Premier Li Keqiang outlined an “Internet Plus” plan to link web companies with manufacturers. Authorities also plan to give foreign investors access to Shenzhen’s stock market, the hub for technology firms, through an exchange link with Hong Kong.
Among global technology companies with a market value of at least $1 billion, all 50 of the top performers this year are from China. The sector has the highest valuations among 10 industry groups on mainland exchanges after the CSI 300 Technology Index climbed 69 percent in 2015 through Tuesday, more than three times faster than the broader measure.
The CSI 300 technology gauge fell 2.2 percent at the close, the most among all industries and its largest decline in almost two weeks. The broader index advanced 0.8 percent.
Technology companies have posted the biggest gains among Chinese IPOs during the past year, helped by a regulatory ceiling on valuations for new share sales. Beijing Tianli Mobile Service Integration Co. is the top performer among 147 offerings during the period after surging 1,871 percent from its offer price to trade at 379 times earnings.
‘Extremely Expensive’

Valuations in China are now higher than those in the U.S. at the height of the dot-com bubble just about any way you slice them. The average Chinese technology stock has a price-to-earnings ratio 41 percent above that of U.S. peers in 2000, while the median valuation is twice as expensive and the market capitalization-weighted average is 12 percent higher, according to data compiled by Bloomberg.
“It’s a bubble in the making,” Teng Bingsheng, an associate dean at the Cheung Kong Graduate School of Business in Beijing, said in an interview on Tuesday. “Valuations are extremely expensive.”
China lacks some of the most extreme excesses of the dot-com era because of regulations that require any company seeking a listing on the nation’s biggest exchanges to be profitable.
Smaller Size

“High valuations don’t necessarily mean that they are unreasonable,” Gui Haoming, the Shanghai-based director of the wealth management research department at Shenwan Hongyuan Group Co., the nation’s second-biggest brokerage by market value, said on April 3. “Some of the valuations can be digested by high earnings growth.”
The smaller size of China’s technology sector also makes it less likely that a reversal in the rally will cause a broader tumble in equities. The industry accounts for 13 percent of the country’s overall market capitalization, compared with about 31 percent for the U.S. in 2000, data compiled by Bloomberg show. It took the Standard & Poor’s 500 Index about seven years to recover from the aftermath of the dot-com bubble. The Nasdaq Composite has yet to reclaim its high.
While Haitong Securities Co.’s Chen Ruiming says it’s hard to predict when China’s rally will end, he sees growing signs of speculative behavior.
Fund Inflows

The use of margin debt to trade mainland shares has climbed to all-time highs, while investors are opening stock accounts at a record pace. More than two-thirds of new investors have never attended or graduated from high school, according to a survey by China’s Southwestern University of Finance and Economics.
Money has flowed into Chinese stocks in part because the central bank is cutting interest rates to support growth, something the U.S. Federal Reserve did in 1998 to revive confidence amid Russia’s sovereign debt default and the collapse of the hedge fund Long-Term Capital Management.
Like the dot-com bubble, China’s hi-tech boom is creating a new class of wealth -- at least on paper. No less than 12 technology billionaires have been minted this year, according to the Bloomberg Billionaires Index. They include Beijing Tianli Mobile’s Chairman Qian Yongyao and He Ye, a co-founder of Shenzhen InfoTech Technologies Co. That stock has surged 274 percent since the start of January and is valued at 2,628 times earnings.
“Many of these technology companies have bubble-type valuations as speculators take advantage of popular concepts to ramp up shares,” said Haitong’s Chen, a strategist in Shanghai. “Only a very small group, say 5 percent or 10 percent, will make it to become larger companies.”



U.S. Dot-Com Bubble Was Nothing Compared to Today?s China Prices - Bloomberg Business

[Saburosakai]

Infatti:

Market: Slowing Growth and Massive Debt Raise Risk
By Phil DeAngelo Follow | 03/10/15 - 084 AM EDT

NEW YORK (TheStreet) -- The outlook for investing in China ETFs and mutual funds seems darker than the smog above Beijing.

Investors must accept that China's epic growth the past 25 years has to cool considering the country has already overbuilt, resulting in stratospheric corporate and government debt loads. Investing in China is growing ever riskier amid weakening real estate values and slowing economic growth. At the same time, escalating manufacturing costs have inspired foreign contractors to go to other countries, and a strong currency makes exports less competitive.
"The Chinese economy is ultimately headed for some kind of economic crisis, and it just might be getting into real trouble in 2015," the Jerome Levy Forecasting Center wrote in a February 13 report. "China's economy has emitted some disturbing signs of weakness, such as its January merchandise trade report, reports of less travel and spending by Chinese tourists, a broad pattern of weakening Chinese orders at international capital goods manufacturers, and falling home prices in most major cities."
Volatility Rising in the Stock Market
Volatility in China's stock market shot up in the new year as regulators cracked down on brokers for not following margin rules. Margin trading in China amounts to 2.4% of the stock market's total market capitalization and is among the highest on the planet. A modest correction could lead to a flood of margin calls that gives way to an onslaught of selling and losses for heavily leveraged investors.
An ETF with exposure to the stock market that mainlanders trade, Deutsche X-tracks Harvest CSI 300 China A-Shares ETF (ASHR), slipped 6% year to date after flying 56% the prior 12 months, thanks in part to heavy margin borrowing.
iShares China Large-Cap ETF (FXI) -- the flagship ETF tracking China -- fell less than 1% so far in 2015 through March 6. It's up 20% in the trailing year, Morningstar data shows. It outpaced its benchmark by a wide margin. iShares MSCI Emerging Markets ETF (EEM) has flat-lined this year and is also flat for the trailing year.
In January, U.S. domiciled mutual funds investing in Chinese stocks had no net inflows, after having in December $200 million in net outflows, according to data from Lipper Inc. China ETFs saw $272 million in net inflows the first month of the year, a sharp rebound after experiencing $242 million in outflows in December.
Weakening Economic Growth
In March, the People's Republic lowered its economic growth projection for 2015 to 7% -- the slowest rate in 25 years -- after growing by 7.5% in 2014. Growth projections for money supply and consumer inflation were lowered to 12% and 3%, respectively. That's a slowdown from the 13% and 5.5% growth seen in 2014. Economic growth will taper even more next year to 6.8%, Bank of America Merrill Lynch's (BAC) economists forecast. This year's budget deficit was revised higher to 2.7% of gross domestic product (up from 2.3% of GDP) as government spending must be boosted to support economic expansion.

[Amati75]

A me piu; che altri ha fatto "senso" questo dato:

The industry is leading gains in China’s $6.9 trillion stock market, sending valuations to an average 220 times reported profits, the most expensive level among global peers. When the Nasdaq Composite Index peaked in March 2000, technology companies in the U.S. had a mean price-to-earnings ratio of 156.

[-Duca-]

a me risulta un p/e di 18 per quanto riguarda la borsa di shanghai, con quotazione a 4000 punti, contro i 6000 punti del 2008 all'apice della bolla..

[Amati75]

a me risulta un p/e di 18 per quanto riguarda la borsa di shanghai, con quotazione a 4000 punti, contro i 6000 punti del 2008 all'apice della bolla..

Il dato e' relativo al settore tecnologia, non alla borsa in totale:


The world-beating surge in Chinese technology stocks is making the heady days of the dot-com bubble look tame by comparison.
The industry is leading gains in China’s $6.9 trillion stock market, sending valuations to an average 220 times reported profits, the most expensive level among global peers. When the Nasdaq Composite Index peaked in March 2000, technology companies in the U.S. had a mean price-to-earnings ratio of 156.

[-Duca-]

Il dato e' relativo al settore tecnologia, non alla borsa in totale:


The world-beating surge in Chinese technology stocks is making the heady days of the dot-com bubble look tame by comparison.
The industry is leading gains in China’s $6.9 trillion stock market, sending valuations to an average 220 times reported profits, the most expensive level among global peers. When the Nasdaq Composite Index peaked in March 2000, technology companies in the U.S. had a mean price-to-earnings ratio of 156.

ok.. cmq se il p/e medio dell'indice e' 18 non mi pare chissa' quale stravaganza.. specialmente considerando che da alcuni mesi e' possbile acquistare da hong kong i titoli della borsa di shanghai e viceversa, ovvero chiunque via hong kong, puo' investire in titoli cinesi, la platea degli investitori si e' allargata moltissimo.
francamente le bolle piu' grossa e preoccupante mi sembra quella immobiliare..

[Amati75]

ok.. cmq se il p/e medio dell'indice e' 18 non mi pare chissa' quale stravaganza.. specialmente considerando che da alcuni mesi e' possbile acquistare da hong kong i titoli della borsa di shanghai e viceversa, ovvero chiunque via hong kong, puo' investire in titoli cinesi, la platea degli investitori si e' allargata moltissimo.
francamente le bolle piu' grossa e preoccupante mi sembra quella immobiliare..

Visto che ci sei piu' vicino di noi, suona plausibile:


We Traveled Across China and Returned Terrified for the Economy

China’s steel and metals markets, a barometer of the world’s second-biggest economy, are “a lot worse than you think,” according to a Bloomberg Intelligence analyst who just completed a tour of the country.
What he saw: idle cranes, empty construction sites and half-finished, abandoned buildings in several cities. Conversations with executives reinforced the “gloomy” outlook.
“China’s metals demand is plummeting,” wrote Kenneth Hoffman, the metals analyst who spent a week traveling across the country, meeting with executives, traders, industry groups and analysts. “Demand is rapidly deteriorating as the government slows its infrastructure building and transforms into a consumer economy.”

The China Steel Profitability Index compiled by Bloomberg Intelligence barely rose in March, a time after the annual Lunar New Year when demand would usually surge, and so far this month has resumed its decline. Steel use this year is down 3.4 percent, after slumping as much as 4 percent in 2014, according to BI. It had steadily risen for more than a decade.
Prices for commodities from iron ore to coal are sinking as China’s leadership tries to steer the economy away from debt-fueled property investment and smokestack industries, embracing services and domestic-led consumption. At the same time, President Xi Jinping is stepping up efforts to combat pollution, further squeezing industry.
Interest Rates

Deteriorating economic data has led traders and analysts to speculate that China’s central bank will act to revive growth. The bank has said it will keep an “appropriate balance between loosening and tightening” of interest rates. It has cut interest rates twice since November and lowered lenders’ reserve-requirement ratios once.
Economists are forecasting 7 percent growth in China for this year, in line with government targets and down from 7.4 percent in 2014, according to the median of 59 estimates compiled by Bloomberg. That’s about half the last decade’s peak rate of 14.2 percent in 2007.
The slowing steel and metals activity suggests the outlook could be grimmer.
“There is a big fear this is going to get worse before it gets better,” Hoffman said in an interview. “It’s as bad as the data looks, if not worse.”

We Traveled Across China and Returned Terrified for the Economy - Bloomberg Business

[-Duca-]

Si chiama Hong Kong - Shanghai stock connection, è partito a metà Novembre 2014,
Shanghai-Hong Kong Stock Connect to Launch Nov. 17 - Interview with Prof. Terrill Frantz - China Briefing News
permette a chiunque abbia un broker account a Hong Kong di investire nella borsa di Shanghai, ovvero a chiunque al mondo, visto che a Hong Kong non esiste alcun controllo sui capitali ne in entrata ne in uscita. Dall'altro lato, permette ai cinesi continentali, con un portafoglio maggiore di 500.000 yuan di investire nella borsa di Hong Kong.

Ora io non ho dati di quanti investitori via Hong Kong abbiano iniziato a investire a Shanghai, ma è proprio da metà novembre 2014 che è partita la gran salita dell'indice di Shanghai, ovvero proprio in concomitanza con l'apertura della borsa di Shanghai al resto del mondo (anche se solo via Hong Kong).


I problemi della Cina sono altri secondo me, ovvero costi in salita, margini in riduzione, bolle immobiliari diffuse, investimenti pompati ma di fatto inutili o inutilizzati/sotto utilizzati.
Tuttavia c'è una rette fittissima di imprese funzionanti, "efficienti" e relativamente economiche.. come al solito dove lo stato pompa e regolamenta crea danni, in primis appunto l'immobiliare.

[Qassim]

Più che lo stato, che mi risulta anzi stia tentando e non da ora di frenare le bolle, immobili in primis, sono i governi provinciali che usano la bolla (la terra è la loro) per incassare alti margini e poi spendere. Ovviamente un po' di soldi resteranno attaccati alle mani degli amministratori...

[-Duca-]

Più che lo stato, che mi risulta anzi stia tentando e non da ora di frenare le bolle, immobili in primis, sono i governi provinciali che usano la bolla (la terra è la loro) per incassare alti margini e poi spendere. Ovviamente un po' di soldi resteranno attaccati alle mani degli amministratori...

veramente la cina ha da poco abbassato i tassi di interesse ed ha abbassato i tassi di riserva delle banche, altro che frenare immobili e speculazione..
a questo va aggiunto il livello provinciale di distorsione