China stocks down $952b from high
FOUR years after China's growth helped lead the global economy out of a recession, the nation's stock market has lost more money for investors than any other in the world.
The Shanghai Composite Index - which doubled in 10 months through August 2009, as the government poured US$652 billion of stimulus into building roads, railways and housing - has tumbled 43 per cent from its high, destroying US$748 billion (S$952 billion) in market value.
Only Greece's ASE Index has fallen more in percentage terms.
China looked unbeatable in 2009, surpassing Germany as the world's third-largest economy and growing 6 per cent in the first quarter, while the United States shrank 4 per cent.
Now, China is poised for the weakest expansion since 1990, as the government reins in an unprecedented US$1.6-trillion lending boom in 2009 that helped send home prices to all-time highs and left local governments with record liabilities.
Premier Li Keqiang is trying to transform China, where per-capita incomes are 88 per cent lower than in the US, from an exporter reliant on a managed currency into a consumer-led economy.
The country's stock market is like a "dead animal", said Mr Carter Worth, the New York-based chief market technician at Oppenheimer. While the index doesn't have the same downside as that four years ago, the likelihood of gains is low, Mr Worth said.
The Shanghai Composite rose 0.2 per cent to 1,993.80 yesterday, paring its drop so far this year to 12 per cent, after the ruling Politburo pledged to stabilise growth while pressing on with economic reforms.
It is valued at 10.7 times reported earnings, down from 29 times at the peak in 2009.
Templeton Emerging Markets Group executive chairman Mark Mobius remains bullish on Chinese stocks. "The timeframe may be a little longer but, at the end of the day, I believe China's stock market will surpass that of the US," he said.
Measures of commodity producers, utilities and industrial companies have plunged more than 45 per cent since Aug 4, 2009. The industries account for almost half of the Shanghai Composite.
Shares that rallied during the past four years in the health-care, consumer and technology industries represent about 19 per cent of the Shanghai Composite.
A shortage of stocks that stand to benefit from the government's new focus on services has made them expensive, said Goldman Sachs' chief China strategist, Ms Helen Zhu.
Said Mr Wang Sheng, chief strategist at Shanghai-based Shenyin & Wanguo Securities: "The transformation faces lots of uncertainty and investors have yet to fully realise its pain."