China Large and Small Cap Indices seem to be approaching longer term valuation levels. Also:
- China’s margin debt is substantially lower. Outstanding margin debt on the Shanghai and Shenzhen stock exchanges fell to 1.25 Trillion Yuan on Monday from a record high of 2.27 Trillion Yuan on June 18th. Stock market peaked on June 12th.
- Large Cap Stocks estimated P/E ratio is approx. 10 which represents 2013 P/E 5 Year lows.
- While valuation multiples have contracted globally, the Chinese P/E multiple has contracted more. Chinese Large Cap Stocks are now cheaper than the S&P 500 and the Dow Jones Industrials.
- Chinese Small Cap Stocks are still trading at a higher P/E relative to US Small Cap Stocks.
We continue to maintain an allocation to China A Shares in the Endowment Index.
