P/E ratio and risk judgment Collective fear of heights According to the statistics of Shen Yin, in the past 12 months, the Shanghai and Shenzhen 300 Index rose by 52.7% in the first ten months, the P/E ratio (PE) rose from 14 to 25 times, and rose by 38% in the last two months, and the PE rose from 25 times to 35 times. According to the latest data, on February 6, 2006, the average PE of Shenzhen Stock Exchange was PE)43.82 times, and that of Shanghai Stock Exchange was 4 1.28 times -2.6 times that of the world stock exchange market. Therefore, experts teach investors: A shares have a bubble, and it is safe to fall into the bag. So, what kind of indicator is the P/E ratio? P/E ratio is the ratio of listed company's share price to earnings per share (year). Namely: P/E ratio = share price/earnings per share (year). Obviously, this is a proportional indicator to measure the stock price and value of listed companies. It can be simply considered that the higher the P/E ratio, the higher the deviation between price and value. In other words, the lower the P/E ratio, the more valuable its stock is. Quite simply, the P/E ratio is too high, even higher than H shares, which is unimaginable in history. So, why are we on an equal footing with H shares? However, because the mainland and Hong Kong have different understandings of listed companies, the same company is treated differently in different markets. Perhaps Hong Kong investors are more optimistic about financial banking stocks, while mainland investors know more about the strength of resource state-owned enterprises such as Baosteel. The P/E ratios of A shares and H shares may not be so comparable. The differentiation of price-earnings ratio simply uses price-earnings ratio to measure the advantages and disadvantages of different securities markets. Because investing in stocks is the expectation of the future development of listed companies, the existing P/E ratio can only explain the past performance of listed companies, and cannot represent the future development of the company. In recent years, China's economy has maintained a high-speed development, which is unmatched by developed countries in the United States and Europe. The rapid development of China's economy is bound to be reflected in the listed companies. Therefore, the further growth of the performance of listed companies in China can be expected. From this perspective, it should be normal that the P/E ratio of listed companies in China is higher than that of developed countries in Europe and America. At the same time, the P/E ratio, as an indicator to measure the relationship between the price and value of listed companies, is not absolute. In fact, the standard of P/E ratio is closely related to the deposit interest rate of domestic currency. At present, the annual interest rate of the US dollar is around 4.75%, so it is normal that the P/E ratio of the US stock market is around1(4.75%) = 21times. Because, if the P/E ratio is too high and investment is not as good as deposit, everyone will give up investment and deposit money in the bank to collect interest; On the other hand, if the P/E ratio is too low, people will take out their deposits to invest in order to obtain investment income higher than the deposit interest. At present, the one-year deposit rate of RMB in China is 2.79%. If interest tax is also considered, the actual deposit interest rate is about 2.23%, and the corresponding P/E ratio of 2% interest rate is1(2.23%) = 44.8 (times). From this perspective, the China stock market's price-earnings ratio of 45 times is basically reasonable. At present, the average P/E ratio of the US Dow is 2 1 times, the average P/E ratio of the S&P 500 is 24 times, and the annual GDP growth of the US is only 2% ~ 3%, so economic growth is full of uncertainties. China's economic growth in the next 10 year is predictable. This can be seen from the annual reports of listed companies. Judging from the situation of 158 companies that have published annual reports as of February 27th, the average earnings per share is 0.3 1 yuan, and the earnings per share of 37 companies are above 0.5 yuan. From 680 companies with performance forecast, 254 companies predict that their performance will increase by more than 50% in 2006; 40 companies predicted a slight increase in performance, and 159 companies predicted a turnaround. Small and medium-sized board 1 16 All listed companies published their annual reports in 2006, and their net profit increased by 25. 16% on average. The net profit growth of listed companies in 2006 is a foregone conclusion, and energy, petrochemical, real estate and machinery are the main industries with high returns. Most institutions are optimistic about the performance growth expectations of listed companies in the next two years. From the comparison of the growth rates of the purchase price index of raw materials, fuel and power and the ex-factory price index of industrial products, the purchase price index of raw materials increased by 4.7% in June 5438+ 10, and the ex-factory price index of industrial products increased by 3.3% year-on-year. Although the growth rate is still upside down, the difference has been declining since June last year, 65438+ 10. The cost pressure of enterprises has been reduced, and the expectation of profit improvement is optimistic. Judging from the extended growth opportunities brought by the institutional reform after the share reform, the performance of A-share listed companies will show an accelerated upward trend due to the improvement of corporate governance structure and operational efficiency brought by institutional reforms such as the consistency of shareholders' interests and equity incentives, as well as the performance thickening effect brought by the future asset injection and overall listing of major shareholders. Considering the additional income brought by income tax merger, the expectation of substantial growth in the performance of listed companies in the next two years is quite optimistic. We must also be cautious. Judging from the current market price-earnings ratio, it has fully reflected the expectation of future performance growth. The PE level in Shanghai and Shenzhen in 2006 was about 45 times. Reasonable is reasonable, but it is difficult to estimate how much room to rise. Generally speaking, the current overall pricing level of A shares is not low, which fully reflects the expectation of future performance growth, but it is also compared with the overall premium of A shares relative to H shares. This phenomenon is completely different from that in early 2006. Although the performance growth trend in the next two years has not changed, the current share price has fully reflected this performance growth expectation. Under the background of limited stock supply, fanatical funds pursue limited high-quality stocks, and the result is inevitably inflated prices. From a macro point of view, high credit and rebound in investment will make the tightening economic policy no suspense-this has been verified in the recent interest rate hike measures. Judging from the situation in March, the liquidity of the stock market is still difficult to be substantially affected in a short time. The financial data of June 5438+ 10 released by the central bank showed that the growth rate of savings deposits continued to decline, while demand deposits increased substantially. The popularity of the stock market has attracted a large amount of savings funds to continue to flow to the stock market, and the market capital supply is still abundant in the short term. However, considering the market volatility practice during the two sessions each year and the peak period of lifting the ban on non-tradable shares in April and May, it is inevitable that the market will fluctuate widely. The author of Irrational Prosperity Dancing with Bubbles, Professor Robert Shiller of Yale University, is famous all over the world for successfully predicting the bursting of the Internet bubble in 2000. But what many people don't know is that 1996, 12 In February, when the biggest bull market in history was getting better, Professor Shearer submitted an academic report to the Federal Reserve, arguing that the market value was obviously overvalued. However, this cry "Wolf is coming" has been shouted for more than three years. During this period, the Dow Jones index rose from 65438+6560.9 1 at the close of 0996 to the highest point of 1 1908.50 in 2000, with an increase of 8 1.5%. In the same period, the Nasdaq index soared from 129 1.38 to the all-time high of 5132.52 in March 2000, with an increase of 297.44%, that is to say, the market tripled. If an investor thinks that the market is overvalued and withdraws from the market at the end of 1996, then he has undoubtedly missed the most profitable period in the bull market. Li Xunlei, director of Guotai Junan Securities Research Institute, believes that there must be a bubble in the A-share market, and how long the bubble can last is the key. A-share bubble can last for quite a long time. The reason is that China's economy continues to improve and the RMB continues to appreciate. He said that almost all industries have bubbles, but this is more or less a problem. China's economic growth shows no signs of slowing down, and the short-term bubble will not burst. He suggested that investors dance with bubbles, and the places that are most prone to bubbles can still participate.