There are many professional investors talking about the low valuation about the Chinese A shares recently. They even compared the price of H share or B share of the same company with its price of A share, and discovered that the A shares of certain companies are cheaper than their counter part in H or B share market. Therefore, the pros declared that A shares are cheap and the Chinese investors are again immature. It seems that they are right with the surge in the A share market on the 2nd day today.
Well, you can not just rely on the economy figures from the Chinese government to make your judgment on Chinese economy. If you had friends living and working as a slave of their properties, or you had taken a ride recently on the very new high speed train and realized that the train had been transporting chairs instead of passengers, or you were receiving promotion materials selling properties desperately located in some ghost town in your email box on weekly basis, you would not agree with these professionals.
China economy was sick even before the financial crisis from the US. And it’s now in a more sever condition now due to last year’s government policies. The policies and money were mostly aimed at creating an instant surge on the GDP, not on the health of the over all economy and well-being of its people. It was like a very sick man being given a Viagra and suddenly he’s up. And ladies desperately missing an orgasm were all cheering. However, a sick man shouldn’t have such erotic actions based on our common sense. It only made his health worse! Now, the effect of Viagra is over. He looks like shit!
With these in mind, the prices of A shares in general are still not cheap enough to cover risks of a property market crash, very likely defaults of local government loans, a possible banking system melt down and some unexpected skeleton in the cupboard.