Market Trends (4th March 2019)

The markets have continued their good run since my last writeup and there is currently a playing catch up by the China market with their recent surge. Shanghai index had rallied by almost 20 per cent since the start of the year. It is mainly driven by firstly their low valuation and also the news that MSCI inclusion of Shanghai A Shares percentage from 5% to 20% which is above initial expectations. There is also divergence seen currently with China markets showing more strength than the US markets which was in contrast with the price action in 2018.

Source: Bloomberg

These two graphs are the Historical Price Earnings Ratio and Price to Book Ratios of Shanghai and HSI index over the past 10 years respectively. The trough for Shanghai index is around PE of 10 and PB of around 1.3, the current index