|Chart Source: Investing.com|
Here are some key trends that point to just how heated the market has become.
1. A-share (domestic) trading activity has exploded.
|Source: Credit Suisse|
2. Weekly account openings have reached new highs. This is a revenue bonanza for China’s brokers as many tap the IPO market for themselves.
3. P/E ratios are touching historical records as well as valuations are stretched in many instances.
4. Margin debt levels are also near record, including as a percentage of market capitalization. Here is margin debt a percentage of the GDP.
Perhaps the most telling sign of speculative activity is this photo. There isn’t much one could say here.
|Source: @enlundm @DoubleEagle49|
China’s public equities market cap is now around $10 trillion (as a comparison, Japan’s whole market is half that). That’s over 13% of the global equity market capitalization (after being just above 5% some six months ago). Chinese tech firms listed in the US are now running back to China where their shares can get an instant pop in valuations.
While many analysts are calling this a bubble, it’s important to point out that bubbles can last for a long time. Unless Beijing interferes – and there is a strong possibility it will – this trend could last for a while. Of course the longer this goes on, the uglier things will get on the way down.