over 2 years ago • 1 min
The chart shows how the earnings yield on Chinese shares has soared this year, while the comparable figure for global developed-market stocks has remained fairly steady.
The earnings yield – which can be thought of as the opposite of the price-to-earnings ratio – shows how much profit investors expect a stock to generate per dollar invested before they’ll consider buying. Just like with a bond, a higher yield shows an investment is considered less safe.
China’s government now has to decide how much it cares that international investors are spooked. It may see increased financing costs for Chinese companies as a price worth paying for greater control over its biggest firms. Or, following reports that authorities called a meeting on Wednesday to calm investors’ fears, it may decide to make further concessions to stop the flight of international capital.
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