The current P/E (price-earnings) ratio of the Shanghai stock market is 13.78 (6/30/2019). The Shiller PE ratio is currently 15.71. Compared to historical averages, the shares traded on Shanghai stock exchange would appear to be undervalued but the Chinese stock market has been characterized by extremely high valuations and price bubbles.
For the latest data, check the Global Valuations dataset by Siblis Research.
Shanghai Composite Index – P/E (TTM), CAPE Ratio & Yield
Need comprehensive data? Purchase the Global Valuations Database by Siblis Research that provides Shiller PE ratios of 22 nations, including Dividend Yields and Total Market Cap to GNI ratios of 28 countries on a monthly basis. Check a sample dataset from here.
Need data of the individual Chinese companies? Purchase the Global 10,000 Fundamentals dataset by Siblis Research that provides key fundamental financial data of the 10,000 largest public companies in the world. The fundamental data includes annual revenues, earnings, free cash flows, total assets, total liabilities, book values and market caps. Data is available at least for the last 10 years for all the companies, reaching back to the year 1999 for the largest companies. Check a sample dataset from here.
The roller coaster ride of the Chinese stock market
Chinese stock market has never been suitable for the faint-hearted. Shares have been traded in Shanghai only for three decades but during that time the market has been experiencing some of the worst bubbles the world has ever seen. Between January 2006 and October 2007, the average price-earnings ratio of Shanghai stock exchanges increased from 17 to 70. It only took nine month for the P/E ratio to drop below 20 again. Compared to the previous bubbles, the valuations at the end of 2015 were quite modest. P/E ratio only doubled between 2014 and 2015 which barely even count as a bubble when previous price increased are taken account. During January 2016, the total market cap of SEE dropped from 29,519 billion to 22,946 billion yuan. The markets have stayed restless in February and only to bravest are buying Chinese equity at the moment.
One reason for the chaos in the Chinese stock market is the lack of institutional investors. Chinese government is restricting international investors from directly owning mainland listed shares. A large portion of the shares are held by individuals with little experience in investing who have been buying stocks with borrowed money and high expectations. This has been creating price bubbles that the government has not been able to control. The price control mechanisms that the authorities have been implementing in order to stabilize share prices are only making the situation worse. Only true solution is modernizing the whole Chinese stock market and opening mainland exchanges fully to foreign investors.