China A-share Strategy Super Growth or Super Bubble
China A-share Strategy Super Growth or Super Bubble 内容简介
Conclusion: A-share companies’ growth is largely exaggerated by investment and non-operational income, although the core earnings growth is still impressive, in our view. Investors do not appear to be discounting the inflated growth in share prices. The A-share market’s valuation, after adjusting for core earnings, is at peak levels of emerging market bubble history. In the near term, the controlled pace of capital account deregulation and China’s political agenda before March 2008 could sustain one of the largest bubbles in financial history. In the long term, the A-share market will eventually de-rate and lose its unique position as the only liquid investment choice for individual Chinese investors as the regulators: 1) extend the country’s one way capital account deregulation to allow outbound capital flow without quotas; and 2) accelerate its onshore financial assets supply (mainly through creating a corporate bond market). What's New: All the 1,480 A-share listed companies have now reported their 1H07 earnings, with impressive aggregate EPS growth of 75% and implied 2007PE of 34.6x. However, we have found that the A-share market’s operational earnings growth is 33%, and the implied core 2007 PE should be as high as 58x, after stripping out investment and non-operational income (clearly investment and non-operational incomes are not repetitive and should not be included in PE calculations). Implications: By all means, the A-share market is at peak valuation levels compared to other asset bubbles in emerging market history. However, given China’s unique political agenda and the regulators’ measured pace in opening up the capital account for outbound investment, over-tightening and liquidity leakage risks are moderate in the near term. However, this is an aging bubble that could burst in the coming 12 months. The A-share companies’ 2007 interim results have concluded with investors’ celebration of super growth - 75% aggregate EPS growth YoY. The benchmark Shanghai Composite Index has risen 38% since July 7, when the interim results season started. However, after stripping out investment income and non-operational income, the core EPS growth is less than half that of the reported, at 33%. Implied 2007 forward PE ratios (by annualizing 1H07 earnings) look very different after the same exercise. The market 2007 PE is 34.6x using reported earnings. The multiple jumps to 58x using core earnings. Implied core 07 PE ratios are even above 100x for some sectors such as consumer discretionary, health care and consumer staples. My conclusions: 1) A-share companies’ growth is largely exaggerated by investment and non-operational income, although the core earnings growth is still impressive. Investors do not appear to be discounting the inflated growth in share prices; 2) A-share market’s valuation, after adjusting for core earnings, is at peak levels of emerging market bubble history.
China A-share Strategy Super Growth or Super Bubble相关资源下载
China A-share Strategy Super Growth or Super Bubble下载