2009-06-17

China Small Cap Bubble?

Bloomberg has the story:
“We’re seeing a bubble in small-cap stocks,” said Zhong, who helps oversee $220 million in Hong Kong. Zhong predicts the CSI 500 Index, a benchmark for China’s 2.1 trillion-yuan ($307 billion) market for small-cap equities, will slide as much as 30 percent “in the near future” because he expects companies will report first-half results that disappoint investors. The index gained 1.6 percent to 3,403.96 at the close today.

The jump in mainland-traded equities with a median value of 3.8 billion yuan pushed the price-to-earnings ratio for Shenzhen Topraysolar Co. to 110, data compiled by Bloomberg show. Xuzhou V V Food & Beverage Co. fetches 160 times profit, almost double its PE ratio of 87 at the top of the last bull market. Beijing Vantone Real Estate Co. shares rose 171 percent since Nov. 9, even as analysts cut their earnings estimates by 35 percent.
My own observation shows that many Hong Kong small cap Chinese companies have also moved higher, though nowhere near as much as in China.

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