The Chinese market has experienced a massive rally outperforming the major global markets. This rally coincides with a slowing economy and increasing concerns in the real estate sector.

Small and medium size companies are the winners of the recent rally in the Chinese equity market, substantially outperforming the returns in the Shanghai Composite and Shenzhen Component indices. These stocks benefited greatly from the new wave of IPOs in the Chinese market. Those newly listed companies have performed rather strongly with the vast majority hitting their limit-up prices during the first few days of trading. New IPOs are perceived as cheap with virtually no new IPO pricing above the 24xP/E ratio.

Global Stock Market Performance

Data Source: Bloomberg. Data as of 15 May 2015

About the Author:
Kathy K. Xu is General Manager of Shanghai Free Trade Zone Branch, Shenwan Hongyuan Securities Co Ltd, a state-owned securities house with CIC as its ultimate shareholder. She has worked in China financial markets over 20 years, with professional experience working with QFIIs for 12 years. She is a MBA graduate of Roosevelt University.

The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.