Article / 27 May 2016 at 10:14 GMT

Six straight red weeks in Shanghai

Saxo Capital Markets China
  • Shanghai Composite posts sixth week of declines in a row
  • Benchmark index sees volume fall 10% since March and April
  • Margin debt down by more than 1.4m yuan: Bloomberg

Shanghai Composite
Dressed in red: The SHCOMP slid lower for the sixth straight week. Photo: iStock

By Jay Luo

Chinese stocks traded in a tight range Friday on thin trading volume. The benchmark Shanghai Composite Index closed almost flat and the Growth Enterprise Market Index slid by 0.77%. 

Over the whole week, the SHCOMP dropped 0.16% marking the index's sixth straight week of losses. The last time we saw such a protracted decline was four years ago. 

The market has been stuck in a tight range around 2,800 since May 10. During this period, there were no major, equity-shaking events but the market's focus was on the US Federal Reserve and the CNY exchange rate. 

The average trading volume was about 60% of that seen in March and April.

Shanghai Composite index (daily):
Shanghai Composite Index, Daily
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Source: EastMoney 

It has now been one year since the Chinese equity market collapse that saw the Shanghai Composite tumble 45% from its level 12 months prior. 

According to Bloomberg, the market lost about 30 trillion yuan over the past year and margin debt, which fueled 2015’s bull market, has dropped by more than 1.4 trillion yuan.

According to the Shanghai and Shenzhen Stock Exchanges, the average P/E of stocks on the Shenzhen exchange is 36.82x while the average P/E of shares of growth enterprise market index shares is 68.44x.

The average P/E of stocks on the Shanghai exchange is 13.84x.
P/E of A Shares


Data released on Friday showed China’s industrial profits for enterprises above a designated size increased 6.5% (year-over-year) for the January-April period. This is lower than the 7.4% growth rate seen in the January-March period. 

In April, industrial profits rose 4.2 % (y/y) to 502 billion yuan. The data include large companies with annual revenues of more than 20m yuan from their main operations.

— Edited by Michael McKenna

Jay Luo is an editor and analyst at Saxo Capital Markets in China


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