Share Prices Promp Re-Balancing
Gao Xiqing, vice-chairman of the China’s National Council for Social Security Fund, has been quoted as saying concerns that the rapid rise in mainland share prices is unsustainable.
He has been selling shares to re-balance the fund and reduce its exposure. The fund is obligated to limit its holdings in domestic stocks to 30% of its total assets. With soaring prices, such shares now account for nearly 40% of its portfolio.
The benchmark Shanghai Composite Index has risen 41% this year, after its 130% increase in 2006. Mainland share prices are now valued at more than 40 times 2006 earnings and nearly 30 times 2007 earnings, compared to a price-earnings (P/E) ratio of around 16 for the MSCI China Index, which covers China-based companies listed overseas.