This “mini-crash” has now presented REAL value in the companies listed on the Hang Seng China Enterprises Index
To confirm this, we can use two of the most classic measures of stock market value…
The price-to-earnings (P/E) ratio, and
The dividend yield.
The P/E ratio compares an investment's share price to its earnings per share.
The lower the share price is relative to earnings, the cheaper the share is valued, which means we can expect buyers to soon dominate the market which will bring up the share price…
The dividend yield, on the other hand, is also an important measure to show how much a company pays in dividends each year, relative to its share price.
This Hang Seng China Enterprises Index is trading at a PE ratio of 8 with a dividend yield of 4.5%.
For comparison, the benchmark index for the US – the S&P 500 – is on a P/E ratio of 22.05. And its dividend yield is 1.94%.
This is important as it tells us in rough terms that there’s an incredible amount of upside potential here. You see, for this index to catch up to the largest 500 US company valuations, it would have to rise somewhere between 132% and 175%.
But now is not the best time to buy…
That’s because the down trend is not over.
Once the escalation in tariffs between the US and China subside, it will alleviate a lot of the selling pressure.
This will in turn see the uptrend return. And when this happens, there will be great opportunities to make a large amount of money in Chinese stocks over the next three years. I explained why in my latest issue of Real Wealth and I’ll be telling readers when exactly to get in..
If you want to be ready for this upturn then why not join our Real Wealth network.
See you next week.
Managing editor, Real Wealth
P.S. To discover the best opportunities in China that could net you a fortune in the coming years, then I urge you to read Real Wealth.