Wednesday, June 8, 2011

2011 Shanghai SSE Composite Index target

In 2010, the Shanghai benchmark SSE Composite Index fell by -14% YoY to 2808 at the year close.

SSE Shanghai Stock Exchange trading floor

Shanghai Stock Exchange trading floor

Now we, Mr China, release our own SSE Composite Index target as 2629 in the year 2011, an additional -6.4% annual correction from 2808 since end 2010. Our independent stock market expert team put estimated fair values representing the expected performance of different industries into the Shanghai SSE Composite Index formula and, by our calculations, the Shanghai SSE Composite Index target should be 2629 in 2011.

The main assumptions are, fundamentally:

(1) Chinese economy will remain basically strong in 2011. Read more about our 2011 China GDP target.

(2) There has been a rising concern about inflation and further inflation expectation in China. Read also our 2011 China CPI target. Zhou Xiaochuan, governor of the Chinese central bank, already kicked off the current round of interest rate upcycle since 19 October 2010 to contain inflationary risk in China. Read more about: No more loose Monetary Policy. We do expect more interest rate hikes against inflation in 2011 as the China real 1-year deposit rate in April still exceeds our warning level of -2% (now it is 3.25% - 5.3% = -2.05%).

(3) The impact of non-freefloat shares being unleashed continues to annoy the China A-share market. It is our first time, and perhaps the first time for any similar website, to try to measure its exact impact to the Shanghai A-share market. Learn more about: How can Unleashing Non-freeFloat Shares Impact the A-share Market. For this SSE Composite Index target, we assume the impact of unleashing non-freefloat shares in 2011 will be of the same proportional magnitude as that in the past year.

(4) Our historical statistics show that the annual trend of SSE Composite Index matches 80% with its January monthly performance in the same year. For your information, the Shanghai SSE Composite Index fell down by -0.6%% to 2791 in January 2011, and so it is likely that the 2011 annual trend of SSE Composite Index should follow the same downward trend. Since we put our estimated fair values of the corresponding index weightings into our formula, our term 'target' is by no mean the maximum possible value of Shanghai SSE Composite Index will reach in the year 2011. It actually reflects a fair value (reasonable price) we believe the Shanghai SSE Composite Index will be. We trust our target (fair value) should be a better indicator for general investors, as they may realize if the market value goes over our target then it will no longer be a reasonable price for them to take risk to buy.

According to our rating system, the current SSE Composite Index level of 27XX (<2761?) (as of end May 2011) should be rated as "reasonable".

Shanghai SSE Composite chart

Current Shanghai SSE Composite Index trend

We, Mr China, also do not encourage any risky stock market trading (especially margin trading), please be suggested to go through our risk disclosure and disclaimer statement for details. The 2629 is of course our initial release value of Shanghai SSE Composite Index target in 2011, we will continue to monitor the ever changing market conditions to upgrade/downgrade our Shanghai SSE Composite Index target later if the stock valuation of the index constituents may change.

UPDATE - our 2011 Shanghai SSE Composite Index target has actually been updated, please visit our new article: Updated 2011 HSI and SSEC Index targets to know the exact reason(s) for this latest update.

Related article(s):
2011 Hong Kong Hang Seng Index (HK-HSI) target
2011 China Trade Balance target
Setting our own targets


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