chapter  4
15 Pages

The price-earning ratios in the Chinese stock market: An empirical investigation

ByMOHAMED EL HEDI AROURI AND CHENXIANG LIU

The split-share structure reform launched in April 2005 and strong economic development invigorated greatly the lacklustre equity market. China’s stock market has been developing fast in recent years. The Shanghai Composite Index, China’s main stock market index that tracks yuan-backed A shares and hard-currency B stocks, recorded gains of above 130 per cent in 2006, to make it the world’s best performing major bourse of the year, staging a remarkable turnaround from 18 months earlier when prices floundered at eight-year lows, drawing hundreds of thousands of investors in each day. An investment mania is sweeping across China.