The A-share price correction since October 2007 resembles the bursting of the red-chip bubble in Hong Kong in the mid-1990s. Despite the cyclical correction, the strong long-term fundamentals behind Chinese stocks are still intact. Economic and statistical indicators suggest that the price correction in A-shares is probably in an advanced stage. But price undershoot is still possible in the short-term before a bottom is found. A 20% fall will take the A-share average trailing PE ratio down to the one-standard-deviation undershoot level.
Red-chip bubble dTja vu all over again
The A-share price correction that started in October 2007 resembles the bursting of Hong KongÆs Red-chip bubble between 1994 and 1999 Chart 1. The correction...
¬ Haymarket Media Limited. All rights reserved.
