US stocks overvalued, China’s shares more reasonably priced?

Via Bloomberg

I came across an interesting piece on Bloomberg’s market live blog yesterday making a case for Chinese shares offering better value compared to US stocks This was based on the valuations based on a price to earnings ratio. The price to earnings ratio is a widely used metric for investors to decide on a stock prices valuation. It is calculated by measuring it share price vs its earnings per share. A high p/e ration can mean that a companies stock is over valued.

Via Bloomberg If you take a look at the chart below you can see that the Nasdaq has a high blended forward P/E ratio just around the 10 mark compared to the other major indices listed. The forward P/E ratio uses future earnings guidance rather than trailing figures. For a run down on the different types of P/E check out this article here.
Now the reason for the Nasdaq’s high p/e ratio is that technological stocks have raced higher on the hopes of increased tech spending, Working from home, spending on software and hardware, and increased moves towards digitalisation are all expected to boost profit hopes of the Nasdaq.

The question going forward as we come into earnings season is whether or not the Nasdaq’s increased stock valuation can withstand an overall shrinkage in the US stock market as a whole. On a bargain p/e basis this means Chinese shares may offer a more stable path to ongoing gains given their low valuations.
Shanghai Comp