As it extended Thursday’s striking 4.3% gains by rallying another 1.3% on Friday, China’s Shanghai Composite toppled Indian benchmarks as the best performing equity market this year.
On the back, of a remarkable rally of 20% since November 19, China’s benchmark index now boasts YTD gains of 39%, compared to 34.4% on the Sensex. On Friday, the Chinese barometer closed the session at 2937.65, up 38.19 points while Sensex closed down 104.72 points or 0.4% at 28,458.10. Even in US dollar terms, the Shanghai Composite has outpaced the Sensex as it expanded by 36.7% in 2014 as against 34.4% rally on the Sensex.
If the momentum in Chinese stocks is maintained this month, China would have outperformed India for the first time since 2011. At current levels, the Shanghai Composite still trades at relatively lower valuations to the Sensex as it is changing hands 14 times at trailing 12-month earnings. The Sensex on the other hand is trading at a TTM price to earnings multiple of 19.8,as per to Bloomberg data.
The weekly buying interest in Chinese stocks was at its highest since April 2009 on speculation that the People’s Bank of China may cut reserve requirement ratios after reducing interest rate for the first time in two years, last month in order to support ailing economic growth. The unprecedented rally led China’s market watchdog, China Securities Regulatory Commission issued a statement on its website asking investors to consider risks while putting money into Chinese stocks.
On Thursday, in its portfolio strategy for 2015, Goldman Sachs had listed both India and China amongst its overweight markets. Although it predicted India’s GDP growth may over take that of China in 2016, it assigned higher expected total market return of 17% in dollar terms for China compared to 13% for India.
