HONG KONG- Li Ka-Shing, the richest Chinese man, and also the Chairman of the Hong Kong-based Cheung Long Holdings, Ltd., said on May 17, the bubble phenomenon has emerged in China's stock market(1).
Li is worried that the bubble will burst and has advised investors to only purchase what they can afford.
Li Ka-Shing told the reporter after the stock holders' meeting that being a Chinese, he was very concerned about the recent performance of China's stock market. Li thinks the ratio of price and earnings per share (PE) in China's stock market is 50 to 60 and the bubble phenomenon definitely exists.
Li said he didn't want China's stock market bubble to burst because the unstable economy in China will shake Hong Kong's economy as well.
Li added, "though the PE in Hong Kong's stock market is reasonable, people in Hong Kong should not over-invest. People should remember that stock markets, including those in Hong Kong and China, rise and fall."
He thinks this sort of stock market speculation is not enough to sustain prosperity in Hong Kong. People in Hong Kong should really invest in innovative technology and rethink what is unique to Hong Kong so that it can compete with others.
Beijing has relaxed restrictions on the investment scope for China's Qualified Domestic Institutional Investors (QDII). However, Li didn't think it would help Hong Kong's stock market by letting banks in China invest for their customers in Hong Kong stocks. Under the QDII mechanisms, initially there will only be about 50 billion yuan (US$6.5 billion) flowing into Hong Kong. This capital will have a very limited effect on Hong Kong's stock market since it would only account for one per cent of the total Hong Kong stock market's value.
(1) On May 9, the stock market in Shanghai hit an all-time record high 4000 points. The day before, on May 8, 420,000 new accounts were set up, which broke the record high for a single day. The total number of accounts opened in Shenzhen and Shanghai is reaching 100 million—nearly 10 per cent of China's population.
