Bargains can spark a feeding frenzy, provided the targets are high enough in the water to spot.  Photo: Bluelyn

Translated by Andrew Vanburen from a Chinese-language piece in First Financial

DEPRESSED P/E ratios can be like chum in the water, attracting a school of bargain hungry sharks.

But if they sink to the bottom and stay there, even the big fish ignore them.

The fact is that the weakening economy at home and the bleak prospects overseas have got Chinese shares in a proverbial valuation trap with little hope of emerging from the depths anytime soon.

Although the benchmark Shanghai Composite Index showed some resiliency late last week, regaining a chunk of its value on Friday following news of the second interest rate cut in a month, the performance since then has been more of the same – a downward spiral.

The recent breaking of the 2,200 level set a six-month low for the Index on continuous deflating news from the economic front from both home and abroad.

This also allowed the main tracker of A- and B-shares listed in both Shanghai and Shenzhen to flirt with the all-important, psychologically significant 2,132 level, which represents a 12-month nadir.

And the Monday morning blues seen this week represents the third losing start to a trading week seen by the Index since June.

In a nutshell, the Shanghai Composite Index is down over 23% year-on-year, and nearly 2% year-to-date from January 1 – when the market itself was suffering from an extended slump.

It's been a rough half year for China shares

The prolonged period of low price-to-earnings (P/E) ratios for the bulk of A-share listed enterprises is being exacerbated by the grim economic outlook worldwide as well as the contracted earnings growth potential at home.

These factors are doing little if anything to boost investor sentiment in Mainland China’s capital markets these days, with most not asking when a turnaround will come, but where the true bottom in for the bourse during the current half.

Therefore, it isn’t easy to gather why a sustained market recovery is further delayed when the bulk of the investing public believes that the benchmark Index may be heading even further south before things are all said and done.

See also:

DAMAGE CONTROL: Retail Investors Losing Confidence In PRC Mkt?

TOUGH SELL? China Bears May Be Packing Bags

MARKET MAYHEM: Making Sense Of China Shares

Middle East Kingdom To Boost Middle Kingdom Shares?

You may also be interested in:

You have no rights to post comments

Counter NameLastChange
AEM Holdings2.3200.030
Best World2.450-0.010
Boustead Singapore0.9500.005
Broadway Ind0.1270.002
China Aviation Oil (S)0.9100.005
China Sunsine0.4100.010
Delfi Limited0.895-
Food Empire1.2900.010
Fortress Minerals0.305-
Geo Energy Res0.3100.010
Hong Leong Finance2.4900.010
Hongkong Land (USD)2.9200.090
ISDN Holdings0.295-0.005
IX Biopharma0.0430.003
KSH Holdings0.250-0.005
Leader Env0.050-
Ley Choon0.043-0.001
Marco Polo Marine0.0680.001
Mermaid Maritime0.1390.003
Nordic Group0.3300.020
Oxley Holdings0.089-
REX International0.137-0.001
Southern Alliance Mining0.4500.005
Straco Corp.0.485-0.010
Sunpower Group0.205-
The Trendlines0.0700.001
Totm Technologies0.022-
Uni-Asia Group0.8350.010
Wilmar Intl3.4100.010
Yangzijiang Shipbldg1.7500.010

We have 663 guests and no members online

rss_2 NextInsight - Latest News