Nice post Desmin. I would just query those div yields. Last time...

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UmiTrader

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21/12/14

16:05

Post #: 14493192
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Originally posted by Desmin ↑

Hi Keygeo, you can invest in the SSE by buying AMP Capital China Growth Fund (ASX:AGF) which mimics the SSE. The shanghai composite is an extremely retail-based market which results in various anomalies in stock price movement. The events occurring on the SSE directly contradicts the efficient hypothesis theory because, unlike the ASX which is a developed market, the SSE is an emerging market and this means that the market has fewer financial institutions as participants (80% of SSE investors are retail). This results in a less efficient market - since most chinese investors speculate rather than invest, large caps which comprises the SSE50 are sold down and the speculative stocks becomes WAY overvalued.

My personal favourite - Industrial and Commercial Bank of China (ICBC) trades at PE 5.6, yield of 6%+ (div payout only 34%), ROE of 20%+ and tier 1 capital ratio of ~11%. In comparison, CBA trades at a PE of 15.2, ROE 18.5%, yield of 5% (76% div payout) and 18.7% Tier 1 and Wells fargo trades at PE of 13.4, yield of 2.6 and ROE of 14%. In a developed market, ICBC is being priced as a company that is in a deep crisis but that isn't the financial reality if you look at the numbers and facts. In fact, it is the top international bank, as rated by bankers and forbes. Various other large cap companies are also unfairly sold down. (These prices are AFTER the big moves in SSE from 2k to 3.1k)

Another one is Gree (air con manufacturer) - tripled EPS from 2008-2014 with further growth potential and is priced at PE of 8 with an ROE of 32.7% and div of 4.2%.

In short, I don't view the A50 as a trading op but rather an investing op to multiply my entire net worth (which is unimpressive) and so the volatility don't bother me.

If you want to buy individual A-shares, you would need to buy it via Hong Kong. In fact, after the SSE movements, I think the same SSE stocks are traded more cheaply on the Hang Seng. I am unsure of how to buy stocks in the Hang Seng but I am sure one of the AUS brokers offers exposure to the Hang Seng.

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Nice post Desmin. I would just query those div yields. Last time I looked the Chinese banks and stocks generally had very low yields. It seems to be common practise in China for dividends to be paid as shares, not cash, ie. as a share split disguised as a cash dividend.
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0 Great analysis

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