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Shanghai Drops To Two Month Low, As Chinese Stocks Are S&P Performance Mirror Image YTD

Tyler Durden's picture


Even though news of the Chinese rate hike have so far spared the US stock markets, the Shanghai Composite, the SHCOMP, is now down 5 days in a row, and is back to a level last seen in October 2010, at 2,733, following a 1.7% overnight decline. What is more peculiar is that the main Chinese index is now down almost 15% from the highs reached in the recent upswing, specifically the 3,160 close from November 8. Yet during this entire time, the US stock market continues to melt up on ever lower volumes, and if futures are any indication, last night's latest drop in Chinese stocks will be ignored yet again, as the reverse decoupling thesis is now the prevalent paradigm, 4 short months after it was China's turn to "grow" the world out of the re-recession.

The charts below show the relative performance of the S&P and the SHCOMP on a one month and YTD basis. What is interesting is that the two are mirror images on a YTD basis, with the S&P up 12%, while Shanghai is underperforming by the same amount.

Yet the same question from a valuation standpoint shows that Chinese stocks, on virtually every multiple (EV/EBITDA, EV/Revenue and P/E), are still materially overvalued compared to the US.


Index EV/Revenue:

Index P/E:

Basically, China continues to be dramatically overvalued on a fundamental basis, while the US is the same on technicals. Since the two net out in this bizarro world, where according to "experts" massive snow fall is good for retail sales, we see no reason why the status quo can't continue to infinity and beyond.

Charts: CapIQ


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Tue, 12/28/2010 - 09:06 | Link to Comment HelluvaEngineer
HelluvaEngineer's picture

These guys are such losers.  They can't even manipulate their stock market right.

Apparently Tyler is unaware that the growth is moving back to the USA.  We'll be exporting fraud to lesser countries across the globe.

Tue, 12/28/2010 - 09:27 | Link to Comment sushi
sushi's picture

In addition to fraud you omitted the growing US export of diplomatic cables. The US has a distinct cost advantage in this technology and is a renowned world leader.

Tue, 12/28/2010 - 09:30 | Link to Comment Twindrives
Twindrives's picture

Sales of home discretionary items are down in the Orient.  Put Harry Wanker on a plane to Bejing.  One way. 

Tue, 12/28/2010 - 09:46 | Link to Comment Drag Racer
Drag Racer's picture

well, haven't you heard they have inflation 100% under control which means stock prices as well.

Tue, 12/28/2010 - 10:27 | Link to Comment Rider
Rider's picture


Tue, 12/28/2010 - 09:09 | Link to Comment Alex Lionson
Alex Lionson's picture

Who cares about the Chinese market when you have virtually infinite supply of dollars from Dr. Bernanke???

Tue, 12/28/2010 - 09:17 | Link to Comment gwar5
gwar5's picture

Bolsa index explained: su caca es mi caca

Tue, 12/28/2010 - 09:27 | Link to Comment virgilcaine
virgilcaine's picture

Going to be rough mkts for 11, Shanghai topped way back in aug 09. 

Mkt sees their Europe export falling apart.

Tue, 12/28/2010 - 09:24 | Link to Comment TooBearish
TooBearish's picture

it is really quite simple Western Central banks are providing massive liquidity, with the desire to cheapen their currency while exporting inflation to the Chinee who might be de dip

Tue, 12/28/2010 - 09:28 | Link to Comment 101 years and c...
101 years and counting's picture

Just like the BDI and ECRI, China is only relevant when it's going higher.



Tue, 12/28/2010 - 09:27 | Link to Comment gwar5
gwar5's picture

  Gold   $1405 @0826  Somebody got back from Christmas vacation




Tue, 12/28/2010 - 09:46 | Link to Comment dcb
dcb's picture

futures are up because tlt hit its high hesterday, so now the big boys can seel some of that and make a profit as well and throw that into nthe markets, on top of fed as well

futures have very little to do with economic data, it has to do with trading and low off hour volume allows great manipulation

Tue, 12/28/2010 - 09:46 | Link to Comment David99
David99's picture

Ben and his gang will run away one day with the loot, watch out

Tue, 12/28/2010 - 10:01 | Link to Comment David99
David99's picture

Sorry, one post got repeated so many times, I don't know how?

Tue, 12/28/2010 - 10:28 | Link to Comment Racer
Racer's picture

Chinese market is down because it isn't manipulated like the US market.......

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