The value of Chinese stocks rose above US$10 trillion for the first time, the latest milestone for the nation’s world-beating rally.
Companies with a primary listing in China are valued at US$10.05 trillion, an increase of US$6.7 trillion in 12 months, according to data compiled by Bloomberg. The gain alone is more than the US$5 trillion size of Japan’s entire stock market.
The US market is the biggest globally at almost US$25 trillion.
No other stock market has grown as much in US dollar terms over a 12-month period, as Chinese individuals piled into the nation’s equities using borrowed funds to bet that gains would continue. Valuations are now the highest in five years and margin debt has climbed to a record, all while the economy is mired in its weakest expansion since 1990.
Outside of China, investors are not showing the same enthusiasm toward the nation’s equities. Funds pulled a net US$6.8 billion out of Chinese stock funds in the seven days through Wednesday last week, Barclays PLC said in a research note, citing EPFR Global data.
Dual-listed Chinese shares cost more than twice as much on average on mainland exchanges than they do in Hong Kong.
SHANGHAI INDEX
MSCI Inc’s decision on Tuesday last week against including China’s equities in its benchmark gauge had little impact on the Shanghai Composite Index, which climbed 2.9 percent last week to its highest level since January 2008.
Foreigners are limited by quotas when buying shares in Shanghai via an exchange link with Hong Kong, while similar access to Shenzhen-traded stocks is likely to start this year, the Hong Kong bourse has said.
The Shanghai gauge has rallied 152 percent in the past 12 months, the most among global benchmark indices tracked by Bloomberg, and trades at about 26 times reported earnings.
Less than a year ago, the gauge was valued at about 9.6 times, the lowest since at least 1998.
The Shenzhen Composite Index, tracking stocks on the smaller of China’s exchanges, trades at 77 times profits after surging 194 percent.
STIMULUS OUTLOOK
Gains have been fueled by speculation that Beijing will take more steps to boost growth.
HSBC Holdings PLC predicts a cut — by 50 basis points — in lenders’ required reserves in the “coming weeks,” while Societe Generale AG said one more is needed before the end of the month.
That would be the third reduction this year.
While the latest data showed China’s economy stabilizing, indicators from retail sales to industrial output are still growing near the slowest pace in years and trade remains weak. Exports slumped last month and imports declined for a seventh month.
Profits in the Chinese gauge trailed analyst estimates by the most in six years last year, as economic growth slowed to 7.4 percent, the slowest pace in more than two decades.
Chinese investors’ fervor for stocks remains undaunted, with a record 4.4 million trading accounts opened in the final week of last month, and margin debt on the Shanghai exchange rose to a record 1.44 trillion yuan (US$232 billion) on Thursday.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to