Shanghai 5000 again

It’s 5132 now on the Shanghai stock exchange composite. Its average PE ratio is in the 20’s, which is ok high and anticipates good growth. It first broke 5000 and had a 60x PE in mid-2007, just before things started to get crazy. How crazy? Well, it went to 6000 quickly, but a year after breaking 5000, it was around 2500, during the global financial crisis. A lot has changed in the intervening years. Both imports and exports are down, so the transition to internal domestic growth seems to be working to some extent. Also, CNBC says that credit has eased and even the anti-corruption initiatives seem to be playing a role. Certainly a lot has changed from a decade ago, when economic growth was almost entirely export driven, and things like PPP exaggerated the economy’s size. Stay tuned.

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