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As the recent A-share market approaches the point similar to last year end, the overall valuation of Shanghai Shenzhen 300 Constituent Stock keeps going downward. As the market closed on July 3rd, the P/E ratio of Shanghai Shenzhen 300 index lowered to 10.68x, which is close to the year low record of 10.43x on January 5th, 2012. Such a figure also neighbors Shanghai Shenzhen 300 Index’s 9.37x historic extreme.
Thomson Reuters data shows that by June 29th, the dynamic P/E ratios of Standard & Poor’ 500 Index, Deutscher Aktien Index, Hang Seng Index and Shanghai Composite Index are 12.54x, 9.22x, 9.62x and 9.29x. Analysts pointed out that in terms of international horizontal comparison; there are no huge differences between A-share valuation and mature markets in America, Germany and Hong Kong, etc.. In terms of horizontal comparison, the present A-share valuation is obviously lower than the 998 points on June 6th, 2005 and 1664 points on October 28th, 2008. This is an objective support for enhancing the valuation of Shanghai Shenzhen 300 Index.
The performances of A-share keeps going downwards from 2010 to 2011 and the yearly price drop ranges are 14.31% and 21.68% respectively. After the earlier continuous and considerable decline, the general valuation of A-share market gradually draws together with mature markets.
Judging from the current circumstances, analysts think that though our economic growth slows down, there is little suspense that Chinese economy will grow faster than developed countries like America and Germany in years. Therefore the valuation of A-share market is increasingly attractive.
However, the structural disparity is still significant between A-share market and other markets though the overall valuation of A-share market is drawing close to international developed markets. Thomson Reuters reveals that the industries with highest dynamic P/E ratios are biotechnology (36x), investment (20x) and retail commodity (17x). And the lowest dynamic P/E ratios are seen in air transportation (7x), auto manufacturing (8x) and insurance (9x). In contrast, the industries with best P/E ratios are food and home appliances (22x), non-ferrous metal (22x) and health & medical (20x) and the lowest are banking (6x), railway transportation (9x) and automobile (9x).
Government Supports Private Capitals Move into the Culture Industry
After General Administration of Press and Publication enacted a policy to encourage private capital entering the culture industry, Ministry of Culture also published similar policies.
However, State Administration of Radio Film and Television has not published similar policies. Reporters from China Securities Journal have learned from insiders that reform in the radio, film and television will be slower than that in press and state owned art groups. The private capital has to wait to enter the radio, film and television at least in this year.
GAPP policies primarily focused on supporting private capital apply for national culture industry special funds. It maintains that private capital receive the same treatment with state capital in press park establishment and industry park construction. Ministry of Culture stated that private capital firms will receive equal treatment with state capital firms in terms of projects establishment, tax benefits and regulatory approvals. It also encourage private capital firms including financial institutes, brokerages and culture funds to enter the culture industry.
Cheng Shaofeng, deputy director of culture industry research institute of Beijing University said that, press industry and entertainment industry reforms started relatively early and as a result private capital has high degree of involvements. At present, policies enacted by two main regulatory agencies actually officially acknowledged private capital’s status in the industry and further laid out regulations for participants to follow.
Currently among the public listed companies in the domestic market, press firms have the largest share while radio, film and television firms are next to none. “Press and media industry reform was the fastest therefore privately owned press firm and advertisement firms are abundant with high degrees of market competition. Therefore, it is relatively easy for private capital enter such industries. On the other hand, radio, film and television industries reform has not yet completed yet with planned internet, cable and phone networks combination moving very slow. In addition, many existing firms within the industry still remain bureaucratic. And as a result, private capital still faces resistance to enter into this industry.” Chen stated.
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