The value of Chinese stocks is poised to reach US$10 trillion after a world-beating rally added virtually the equivalent of Japan’s equities market this year.
The Shanghai Composite Index climbed 8.9 percent this week, its biggest jump this year, to close above 5,000 for the first time since 2008.
Companies with a primary listing in China were valued at US$9.7 trillion at the end of trading on Friday, an increase of US$4.8 trillion since the end of last year, according to data compiled by Bloomberg.
Japan’s stock market is valued at US$5 trillion, while the US is valued at almost US$25 trillion.
The Shanghai measure has jumped 146 percent in the past 12 months, the most among major global benchmark indexes, spurred by surging participation among individual Chinese investors and record margin debt.
Worsening economic data has only fueled bets the government will step up stimulus efforts.
The surge in China’s stocks is a “big surprise” given they were among the cheapest in the world last year, Mizuho Securities Asia Ltd chief Asia economist Shen Jianguang (沈建光) said.
“The question we’d like to ask is whether this is based on a pure bubble or whether the economy can catch up,” Shen said.
The Shanghai Composite trades at about 25 times reported earnings. Eleven months ago, the gauge was valued at approximately 9.6 times, the lowest since at least 1998. The Shenzhen Composite, the smaller of China’s two exchanges, trades at 75 times profit, five times the multiple of the MSCI Emerging Markets Index.
Bloomberg’s monthly GDP tracker for China is near the lowest since 2009, and retail sales grew the slowest in April since 2006, while fixed asset investment rose that month by the least in almost 15 years.
While the rally benefits the Chinese Communist Party by helping companies reduce debt levels through the sale of new shares, deepening price swings are challenging the competence of authorities to maintain financial stability in the face of a record 1.41 trillion yuan (US$227.3 billion) of margin debt.
The rally in mainland Chinese stocks has widened their premium over Hong Kong-listed peers to 36 percent, the most since 2011.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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