Can PE ratio be equated with PB ratio? No, Infact in most idealistic scenarios PE is much higher than PB, as PB is more of accumulated profits and owner's equity in the business till date (historical); whereas PE signifies the future earnings growth potential. Interestingly, Nasdaq's PB is now higher than China's PE ratio. So on one side you have the future growth potential for AI (i.e., Nasdaq) vs. accumulated assets/profits for Chinese companies (which includes Tech, manufacturing, consumer etc companies). Makes me think - Is China too cheap or AI is a bubble? (Chart Source :TheDailyChartbook) Credence Family Office
Kunal Das
9mo
China has remained range bound between 15 and 5, over the past 15 years or so. Looks like there is breakdown below earlier support level, as seen in the above chart.
Upayan Bagchi
9mo
Isn’t PB a more suitable metric when looking at financial institutions rather than indexes?
Alok Dubey, CFP®
9mo
Can’t both be true at the same time?
Founder @ FidGenX Advisors | CA & CFA Level 3 Candidate | Specializing in Investment Banking & CFO Advisory Services
9moChina's governance structure presents a significant degree of uncertainty which undermines the confidence in its pricing mechanisms. However, it is noteworthy that China's earnings are derived from a comparatively stable industrial environment. This stability offers a potential advantage for investors seeking opportunities in undervalued assets. On the other hand, the AI sector represents a paradigm shift in technological innovation, characterized by a concentration of market power among a few dominant players. This oligopolistic scenario has led to inflated valuations of tech stocks, particularly in the United States. These valuations lack fundamental resilience and are susceptible to correction. The current market dynamics, driven by speculative consolidation, increase the risk of a market bubble burst.