Advertisement
China stock market
BusinessMarkets

Chinese stocks listed in Shanghai and Hong Kong have never been cheaper. Here’s why

  • ‘The derating of the valuations of Chinese equities has been a big drag on performance,’ abrdn executive says
  • It is ‘still possible for the market to drop further’: Bank of East Asia investment strategist

Reading Time:2 minutes
Why you can trust SCMP
5
The Lujiazui financial district in Shanghai. On average, investors are only willing to pay 1.2 times the book values of companies listed in the city, according to Bloomberg data, the lowest since it began compiling the Shanghai Composite Index in 2002. Photo: Bloomberg
Jiaxing Li
Chinese stocks listed in Shanghai have never been cheaper, or so unloved.
Advertisement

A two-year sell-off has now spilled over into 2024, pushing one market valuation to an all-time low. Money managers and analysts say they are struggling to see an imminent turnaround.

On average, investors are only willing to pay 1.2 times the book values of companies listed in China’s financial and commerce hub as of Wednesday, according to Bloomberg data, the lowest since it began compiling the Shanghai Composite Index in 2002. This represents a mighty fall from a peak of 7.15 times in October 2007.

The fate of mostly Chinese companies represented on the Hang Seng Index in Hong Kong is far worse.

Their average price-to-book value stood at 0.85 times on Wednesday, near the record-low of 0.82 times reported in October 2022. The measure peaked at 1.56 times in April 2015, according to Bloomberg data.

Advertisement

“The derating of the valuations of Chinese equities has been a big drag on performance,” said Nicholas Yeo, the Hong Kong-based head of China equities at abrdn, which manages assets worth US$467 billion globally. That is largely due to the economy being not great, he added.

Advertisement