ChiNext’s cheaper valuations against big-caps may extend the small-cap gauge’s rally
ChiNext surged 3.6pc last Thursday, just less than a week after its relative valuation against the big-caps fell to its nadir
China’s ChiNext index of start-up firms is trading near its cheapest level on record, relative to the nation’s big-cap shares, putting the gauge on course to extend gains from its biggest rally in a year last week.
The ChiNext measure is 2.28 times as expensive as the CSI 300 Index of large-caps on a reported price-to-earnings ratio basis, compared with the lowest level for the multiple of 2.2 times seen on July 21, according to data compiled by Bloomberg.
The index added 0.5 per cent to 1,733.12 on Thursday’s close, and brokers say that rebound is set to extend into next week.
It surged 3.6 per cent next Thursday, just less than a week after its relative valuation against the big-caps fell to its nadir. The CSI 300 fell 0.9 per cent on Thursday.
While the ChiNext gauge is underperforming the CSI 300 this year as investors pull out of smaller firms amid a slowing economic growth and an escalating crackdown on speculative trading, the index has rebounded 4.6 per cent since it fell to a two-year low on July 17, compared with a 1.8 per cent gain on the big-cap measure in the period.
