Measuring the Ridiculous Gains in China

China's Shanghai Composite is now up over 107% year to date.  However, the average stock in the index is actually up 199% year to date.  So an equalweighted index of the Shanghai Composite is up nearly double that of the cap weighted index.  This discrepancy is because two stocks that collectively make up over 13% of the index are up less than 10% on the year.  With the exception of these two large companies holding the index back, most of the largest stocks in the index are actually doing better than smaller ones.  Below we have broken up the stocks in the index by market cap and calculated their average year to date performance.  As shown, the decile (each decile represents 10% of the stocks in the index) of the largest stocks is up an average of 251% versus the decile of the smallest stocks that is up 163%.

      

The Shanghai Composite is broken up into five major sectors: communication, property, utilities, conglomerates and industrials.  Below is a chart of the index's sector performance for the year.  As shown, the property sector in China has actually been the best performer year to date.  This is a stark difference from the horrendous declines of property stocks in the US this year.

We were also able to group the stocks in the index by the sectors that US investors typically follow.  As shown below on an equal-weighted basis, energy, materials, financials, utilities and industrials have outperformed the overall index, while consumer stocks, health care, technology and telecom have underperformed. 

Comments

[mike memory]

Do you know if this is for shares investable to locals only, foreigners only or something else?

[TraderMark]

Shanghai is only open to locals and that is why it trades in its own world. Some stocks trade on both Shanghai and Hong Kong and the valuation in Shanghai is many times, 40-70% higher than it is in Hong Kong which is an open market.

[mike memory]

your response is much appreciated