Japan pips China to become world’s second-largest stock market

Japan has pipped China as the world’s number two stock market, After 02 August 2018 slide, the Chinese market was worth $6.09 trillion next to Japan’s $6.17 trillion. Both markets are ranked after the US which is the world’s largest at just over $31 trillion.

China lost to Japan after Chinese stocks and currency fell this year amid a trade spat with the US. The Japan equity gauge is relatively more stable around the current level but China’s market cap has slumped from its peak this year. The Chinese stock market soared to an all-time high of more than $10 trillion in June 2015 after overtaking Japan in late 2014.

The drop in Chinese shares this year has been driven by concerns about a slowdown in the world’s second-biggest economy and that China would be worse off in a trade war with the United States. US President Donald Trump, who has taken a hard line on trade with several countries around the world, has applied tariffs to some goods imported from China and threatened taxes on the remaining imports.

Indeed, the forward price/earnings ratio of the Shanghai index, based on earnings expectations for 2018, is around 10, the lowest level since panic selling in early 2016 when the market was still dealing with the hangover from the 2015 financial crisis. They are also 40 per cent lower than forwarding PE ratios in US stocks.

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