Category: Money tips Release Date: 2006-12-29
Source: Jiangsu Tianding Author: Qin Hong
The Shanghai Composite Index once a stable trend emerged yesterday, plummeted the day plunged 84.23 points, nearly equaled the June 7 record 89.58-point plunge. Affected Unit also have a strong pre-Po Wei, ranks among the daily limit.
High valuation fatal
Undeniably, the current A-share market to form a vicious circle, once gained, that is, full of good news are going separate ways in the media networks, in the pre-stock index rose the process, and even the world's investment guru bullish A-share market information. But yesterday a sharp fall is bad news flew everywhere, but also Datong-Qinhuangdao Railway, Industrial and Commercial Bank of China listing, but also interest rates and other information.
But the information itself, is neutral, because the interest rate is behind the rapid economic growth, in theory, help boost the confidence of shareholders, the impact on the A-share market is not the cause of the fall, for example, by the end of April increases in interest rates, A-share market is not there would be no decline, but generate a new round of the main Shenglang do? Moreover, this information has also been fully digested by the market, Datong-Qinhuangdao railway, industrial and commercial banks to be listed as early as last week's widely circulated, and even the issue of China's oil as early as the privatization of Liaohe Oilfield in China's oil and other's A-share listed company on the market, The well-known not only that, these so-called bad news is yesterday's collapse of the incentives, or a trauma.
The actual cause of A-share market crash or the root causes of internal injuries is a high A-share market valuation, the current A-share market more than 40 times the average price-earnings ratio (not excluding low-profit shares), with the Shanghai Composite 2245 point difference between the average price-earnings ratio, and is not large, this also shows that the current A-share market is no longer a big room for growth. More than a year caused by its own run-profit chips and some had the urge to cash, while the expansion to accelerate, interest rates and other information has become an opportunity to withdraw their cash, so yesterday triggered a A-share market crash.
Waiting is the best strategy for
In other words, although the A-share market crash yesterday, is the result of various factors together, it is undeniable that with the A-share market crash, the average price-earnings ratio is high there is an inevitable link, because the face of such a high price-earnings ratio valuation levels, new funds are obviously unwilling to enter the A-share market --- more than 40 times earnings, re-up the space really limited.
More importantly, A-share market valuation of sub-section also exists the phenomenon of high, because after repeated speculation in the past year, after a lot of strong stock price rises have been more than 2 times, 5 times even as recently as 10 times. However, net profit growth of whether it also has so fast? Even the injection of quality assets, its earnings per share growth would not be so high, so the level of uplift in the valuation. For example, section G-space defense satellites, G Changfeng the dynamics of the core species such as price-earnings ratio has reached more than 40 times its rise again the space is naturally limited scope, that is difficult to once again reach 30% or even higher level, because once rose 30%, means that up to 50 times earnings, above the valuation of alpine areas.
Once the increase in space is limited, then, these core species on the lack of additional funding next disc, even if funds and other institutional investors also need to find a rival disk, in order to raise the stock price, if only still indulge in the asset into its own mythology and unable to extricate themselves, then almost believe prices have been far away from the crash.
To reduce the valuation level, there are two paths, one stock down automatically to reduce the valuation. Second, the performance of listed companies increased to reduce the valuation. Whether that way, will take time to complete the valuation decline in the level, which need a long period of time with, because the performance of listed companies did not grow by leaps and bounds, but needed time to achieve growth.
In other words, the face of the current A-share market a high valuation, investors need is patience to wait for, or reduce the valuation of stock prices to adjust the level of, or reduce the valuation of the level of performance growth. Only a lower level of such valuation to the appropriate area, have the potential price of the margin of safety to be able to generate investment opportunities. To that time, investors take Jiancang and hold strategy of the center line can obtain very high chance of winning.
