H-Shares vs A-Shares vs TOPIX: In Whack, Out of Whack, Beyond Whacked?

This piece is a fork on the previous piece (H-Shares: Mainlanders Buying - H-Shares Gone Wild, Going Wilder?) which discussed the relative discount at which H-Shares were trading last week when they started bouncing on buying by mainland China accounts through the Shanghai HK Connect (resulting from a rule change starting at the end of March).

This piece discusses relative valuations of the indices (SHCOMP, SZCOMP, ChiNext, HSCEI, the All H-Share basket, the Southbound-eligible Basket (all stocks eligible for purchased by the Southbound (i.e. mainland Chinese) investors in the Shanghai HK Connect programme), and as a relative benchmark of a large Asian market with a significant China axe in terms of sales, production, etc, TOPIX)

CONCLUSIONS:

• OUT OF WHACK: Large cap A-shares are trading relatively rich to H-Shares and TOPIX. The relative valuations of A-share markets as a whole are strikingly high, though are still within the realm of reason in the case of large caps. Shenzhen-listed A shares are more expensive than Shanghai-listed A-shares.
• IN WHACK: HK-listed HSCEI, All-H basket, and the Southbound basket are all still in the realm of "reasonable" as indices. Japan too.
• BEYOND WHACKED:The ChiNext Composite Index is really, really expensive as an index.
• WHAT IS THE WHACK?: When you compare market-wide financial ratios of all stocks in this universe (some 5200+ stocks with a combined market cap of US$13 trillion) except financials and utilities (which leaves US$9+ trillion in market cap), OP/revenue ratios are remarkably similar across markets, which means market richness comes down to Price/Sales ratios, which are a bet on sales growth.