|A man is reflected in an electronic stock board showing stock information at a securities exchange house in Shanghai, China.|
Chinaâs stock market may surpass the US as the worldâs largest by value in three years as state-owned companies sell new shares and the nationâs 1.4 billion people put more of their money into equities, Mark Mobius said.
âThe Chinese population is just dipping its toe into equities and theyâve got a long way to go,â Mobius, who oversees about US$25 billion of emerging-market assets as executive chairman of Templeton Asset Management Ltd., said in an interview with Bloomberg Television in London. State-owned companies are âcoming up with more hugeâ initial public offerings, he said Friday.
Chinaâs market is valued at $3.2 trillion, compared with $11.2 trillion in the US, according to data compiled by Bloomberg. The Standard & Poorâs 500 Index, a benchmark for US equities, has gained 4.1 percent in 2009, while Chinaâs 4 trillion-yuan ($586 billion) stimulus package lifted the Shanghai Composite Index 75 percent this year.
China last month approved its first IPO since September, ending a nine-month ban by regulators. Guilin Sanjin Pharmaceutical Co. and Zhejiang Wanma Cable Co., the first two Chinese companies to go public this year, surged 64 percent and 139 percent, respectively, since they began trading this month.
Sanjin, Chinaâs largest maker of herbal lozenges, raised 910.8 million yuan in a sale that was 500 times oversubscribed. Wanma, which supplies cable to the nationâs top electricity distributor, raised 575 million yuan after investors applied for 638 times the stock available.
While Chinaâs mainland-traded stocks, known as A shares, are âsomewhat overvalued,â the market will move higher as earnings climb, he said. Chinaâs gross domestic product will expand 8 percent this year as the stimulus package boosts consumer spending, Mobius said.
âWe can expect corrections along the wayâ for emerging markets, Mobius said. âI would expect a more steady, jagged movement upwards.â
Chinaâs stock market overtaking the US âis possible, but I think people need to understand the difference between the Chinese equity markets and the US equity markets,â said Donald Straszheim, a former Merrill Lynch & Co. chief economist who runs Los Angeles-based Straszheim Global Advisors. State-owned companies âdominateâ the Shanghai stock exchange while the US stock market consists of private companies, he said.
The US equity marketâs value declined 41 percent from a peak of $19.1 trillion in July 2007 as the nationâs worst financial crisis since the Great Depression dragged down financial and consumer shares. New York-based securities firm Lehman Brothers Holdings Inc. and automaker General Motors Corp. both filed for bankruptcy as credit markets froze.
The US economy is now âout of the woodsâ and doesnât need another stimulus package, Mobius said. Russian stocks are âvery undervaluedâ and should be a âbig holdingâ for investors as markets recover, the fund manager said.
Stocks and bonds in emerging markets have rallied on speculation the global economy is recovering. Bondholders have recouped their losses from the credit crisis as a rally in debt from Argentina to Ukraine pushed JPMorgan Chase & Co.âs benchmark EMBI+ Index to a record yesterday.
The MSCI Emerging Markets Index of equities in 22 countries has climbed 38 percent this year as commodities that sustain developing economies rose. That compares with a 6.8 percent gain for the MSCI index of developed markets.
Stocks in Russia, the worldâs largest energy supplier, trade at less than half the price relative to earnings compared with global peers. The Micex Index is valued at 7.5 times reported earnings, compared with 16.1 for the MSCI EM index.