China Stock Market: 300,000 New Accounts A Day Plus A 45 P/E

By Douglas A. McIntyre Published Jun 29, 7:59AM EDT

Bloomberg has put out some interesting statistics. The current market P/E for China is 45. The S&P stands at 18. More amazing still, since April, investors are opening 300,000 new trading accounts per day. Too bad E*Trade can’t operate there.

Combine these numbers with the roughly 260% increase in the Shanghai Composite Index and it draws the picture of a market that cannot keep going up.

The increase in the the market might be sustainable if it were not for the number of new accounts being opened. As each account owner buys into the market, the odds are good that it forces unusual increases in the market. While a new trader may sell some stocks, it is more likely that in the early stages that trader is much more likely to buy. And, with the market rising, there is always the temptation to chase it.

Shanghai is down about 7% in the last five trading days. Not much compared to the run up. But, the point will come when a sell-off will cause a panic.

Nothing the capital markets have not seen before.

Douglas A. McIntyre

Follow 24/7 Wall St. on Google

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.