Prices in the A-share market have been increasing steadily. But the rise bears little relation to company earnings. The average price-earnings ratio is an unreasonably high 60 times. Stocks are rising because there is a big pool of savings with nowhere to go. It's a classic case of too much money chasing too few shares.
Turnover is thin.
It would require a fully convertible renminbi, and this is not possible until two to three years from now. A merger also requires a healthy banking system. China is expected to float some of its big state-owned enterprises in overseas markets this year. Every initial public offering from China is cheaper and bigger than the previous one. The price-earnings ratio gets lower and lower.