5 ms·

China Overtakes Japan as World’s Second-Biggest Stock Market

45 points by JacobIrwin 12y ago

npalli 12y ago
Here is a scary detail, Japan's stock market capitalization over the last twenty five years. Look how it keeps cycling around $4 Trillion. Year Value 1988 $3,910,000,000,000 1989 $4,390,000,000,000 1990 $2,920,000,000,000 1991 $3,130,000,000,000 1992 $2,400,000,000,000 1993 $2,999,760,000,000 1994 $3,719,910,000,000 1995 $3,667,290,000,000 1996 $3,088,850,000,000 1997 $2,216,700,000,000 1998 $2,495,760,000,000 1999 $4,546,940,000,000 2000 $3,157,220,000,000 2001 $2,251,810,000,000 2002 $2,126,080,000,000 2003 $3,040,660,000,000 2004 $3,678,260,000,000 2005 $4,736,510,000,000 2006 $4,726,270,000,000 2007 $4,453,470,000,000 2008 $3,220,490,000,000 2009 $3,377,890,000,000 2010 $4,099,590,000,000 2011 $3,540,680,000,000 2012 $3,680,980,000,000
- chm 12y ago
  Are these current $?
  - npalli 12y ago
    All in current USD (2012).
    - apaprocki 12y ago
      FYI the Yen has depreciated against the dollar by ~50% since 2012. (chart: http://imgur.com/3kjJf4I http://imgur.com/3kjJf4I)
- mathattack 12y ago
  A couple things to note on this: 1) Market cap changes of the stock market doesn't tell much. If a company changes it's capital structure (more or less debt relative to stock, or Private Buyouts) the market cap changes. 2) A better metric would be "Total value of the equity and debt of all the companies" with an equity and debt breakout. 3) Even still, this would miss privately held companies. It also would just measure the asset values, and not ownership.
  - npalli 12y ago
    IDK, the original article talked about the stock market. On that exchange, market capitalization is measured and is a proxy for everything going on with public companies. What you are talking about in 1) and 2) is some non-existent market on which total equity and debt with vastly different characteristics is valued on one shot. What exchange do you have in mind here? The only time you fully measure all the effects to calculate the enterprise value is when you are buying the company outright. There are several practical reasons why you don’t measure and trade on the enterprise value of the listed companies. To list a few 1.On the equity side you only know the prices of outstanding shares, how will you value the non-traded shares and options? There is no simple measure to assign the control premium on a single company much less the entire stock market. This doesn’t include debt that might convert to equity on different schedules. 2.On the debt side, debt can be convertible to equity, have different seniority, payment schedule, liquidity and risk profiles. What does a consolidated number tell you? Not to mention off-balance sheet commitments and the fact that debt for some sectors like a financial company might not make any sense. What does the enterprise value of Bank of America even mean? 3.Even valuing cash has problems if you are like a US tech company with billions abroad that might be subject to myriad tax rules. Finally with 3) you talked about private companies, at that point you probably need to look at SOE in China as well. Now you are looking at total wealth and not the stock market.
    - mathattack 12y ago
      Thank you for your comments/thoughts. It's very hard to come up with a lot of these numbers. In the US it's possible to look at the aggregate corporate debt market, but you would still miss some liabilities. It doesn't change the point, though, which is that aggregate "public equity only" analysis doesn't tell you much. (Just like looking only at a company's balance sheet equity doesn't tell you much)
  - adventured 12y ago
    That's not true. A company taking on more debt does not automatically alter its market cap. There is no automatic correlation for any given valuation metric, whether we're talking about how high a PE ratio should be, or how debt should be valued when deciding if a market cap is reasonable. Your 1) item rests on the efficient market theory, which is false. It is entirely up to investors - their reasoning and emotion - and it typically varies significantly from one industry to another, and from one company to another. For some companies, taking on debt will not alter the market cap what-so-ever. Apple for example, viewed as an extremely healthy company with massive earnings, can take on debt without it denting their market cap in a negative way.
w1ntermute 12y ago
I wonder if the rest of the Sinosphere will eventually suffer from the same sort of economic malaise as Japan, once they reach first-world status. They all have hierarchical cultures that make creative destruction difficult. So while they can quickly catch up to the West through efficient social organization, they can't break them down and replace them with something better.
- dmix 12y ago
  Counter to most western thought, you can in fact have heavy social control but small-government in terms of economics ala Singapore and have a country make rapid economic process. China's CRC can loosen their grip on business, or selectively ignore it often enough, while still maintaining heavy control of culture and social issues, while still maintaining high growth rates. As we've seen in the last few decades. It didn't seem to stop them previously, why would they try now? Other than civilian revolt which is non-existent in China.
  - w1ntermute 12y ago
    > you can in fact have heavy social control but small-government in terms of economics ala Singapore and have a country make rapid economic process. Singapore's rapid economic progress is due to anything but small government. If you read Lee Kuan-yew's memoirs, you'll see the lengths to which the Singaporean government went to kowtow to Western (and later, Japanese) multinationals. They rolled out the red carpet over and over, for years, before any of those companies made significant investments in Singapore. Also, there are several reasons why generalizing the Singaporean experience to Sinosphere countries doesn't work: 1. Although Singapore has a lot of ethnic Chinese, the country is inherently multicultural and has adopted many British cultural traditions and practices. 2. The country is very small, making social control much easier than in a country the size of China. 3. Lee Kuan-yew himself has said that the Chinese government won't be able to maintain social control as the Chinese population migrates to the cities[0]. The system will have to change, and that will be very difficult. 0: https://www.youtube.com/watch?v=TlkPuamwrlg#t=2m52s https://www.youtube.com/watch?v=TlkPuamwrlg#t=2m52s
a_c_s 12y ago
Given that China's population is 10.8x Japan's, this seems inevitable. Is there more to this that make it notable that I'm missing? Source: https://www.wolframalpha.com/input/?i=china+population+%2F+japan+population https://www.wolframalpha.com/input/?i=china+population+%2F+j...
- melling 12y ago
  I don't think a country's size correlates to its stock market size. http://www.internetworldstats.com/stats8.htm http://www.internetworldstats.com/stats8.htm So, I don't see why you would think that's inevitable.
  - tormeh 12y ago
    How does it not? I guess companies can trade their stocks at foreign exchanges, but over time that should cease. Assuming that productivity per person becomes more than half what it is in the US and that Chinese companies will trade their stocks in a domestic exchange it does indeed seem inevitable. Those aren't very wild assumptions.
    - justincormack 12y ago
      "over time that should cease" why? companies are globally owned, listing is largely about which accounting rules and disclosure and ownership rules you follow, no need for a home bias in the long run. Look at London for an example of a stock exchange largely full of international companies.
  - Alphasite_ 12y ago
    Given countries or reasonably similar per capita wealth it stands to reason that they stand reasonably close together.
- lkrubner 12y ago
  By that line of reasoning, India's stock market should be the same size as China's, and both China and India should have a stock market that is 4 times bigger than the USA. But that is not going to happen.
enntymes 12y ago
http://m.youtube.com/watch?v=DeQ_wfUBjws http://m.youtube.com/watch?v=DeQ_wfUBjws

45 points by JacobIrwin 12y ago

Here is a scary detail, Japan's stock market capitalization over the last twenty five years. Look how it keeps cycling around $4 Trillion. Year Value 1988 $3,910,000,000,000 1989 $4,390,000,000,000 1990 $2,920,000,000,000 1991 $3,130,000,000,000 1992 $2,400,000,000,000 1993 $2,999,760,000,000 1994 $3,719,910,000,000 1995 $3,667,290,000,000 1996 $3,088,850,000,000 1997 $2,216,700,000,000 1998 $2,495,760,000,000 1999 $4,546,940,000,000 2000 $3,157,220,000,000 2001 $2,251,810,000,000 2002 $2,126,080,000,000 2003 $3,040,660,000,000 2004 $3,678,260,000,000 2005 $4,736,510,000,000 2006 $4,726,270,000,000 2007 $4,453,470,000,000 2008 $3,220,490,000,000 2009 $3,377,890,000,000 2010 $4,099,590,000,000 2011 $3,540,680,000,000 2012 $3,680,980,000,000

chm 12y ago
Are these current $?
- npalli 12y ago
  All in current USD (2012).
  - apaprocki 12y ago
    FYI the Yen has depreciated against the dollar by ~50% since 2012. (chart: http://imgur.com/3kjJf4I http://imgur.com/3kjJf4I)
mathattack 12y ago
A couple things to note on this: 1) Market cap changes of the stock market doesn't tell much. If a company changes it's capital structure (more or less debt relative to stock, or Private Buyouts) the market cap changes. 2) A better metric would be "Total value of the equity and debt of all the companies" with an equity and debt breakout. 3) Even still, this would miss privately held companies. It also would just measure the asset values, and not ownership.
- npalli 12y ago
  IDK, the original article talked about the stock market. On that exchange, market capitalization is measured and is a proxy for everything going on with public companies. What you are talking about in 1) and 2) is some non-existent market on which total equity and debt with vastly different characteristics is valued on one shot. What exchange do you have in mind here? The only time you fully measure all the effects to calculate the enterprise value is when you are buying the company outright. There are several practical reasons why you don’t measure and trade on the enterprise value of the listed companies. To list a few 1.On the equity side you only know the prices of outstanding shares, how will you value the non-traded shares and options? There is no simple measure to assign the control premium on a single company much less the entire stock market. This doesn’t include debt that might convert to equity on different schedules. 2.On the debt side, debt can be convertible to equity, have different seniority, payment schedule, liquidity and risk profiles. What does a consolidated number tell you? Not to mention off-balance sheet commitments and the fact that debt for some sectors like a financial company might not make any sense. What does the enterprise value of Bank of America even mean? 3.Even valuing cash has problems if you are like a US tech company with billions abroad that might be subject to myriad tax rules. Finally with 3) you talked about private companies, at that point you probably need to look at SOE in China as well. Now you are looking at total wealth and not the stock market.
  - mathattack 12y ago
    Thank you for your comments/thoughts. It's very hard to come up with a lot of these numbers. In the US it's possible to look at the aggregate corporate debt market, but you would still miss some liabilities. It doesn't change the point, though, which is that aggregate "public equity only" analysis doesn't tell you much. (Just like looking only at a company's balance sheet equity doesn't tell you much)
- adventured 12y ago
  That's not true. A company taking on more debt does not automatically alter its market cap. There is no automatic correlation for any given valuation metric, whether we're talking about how high a PE ratio should be, or how debt should be valued when deciding if a market cap is reasonable. Your 1) item rests on the efficient market theory, which is false. It is entirely up to investors - their reasoning and emotion - and it typically varies significantly from one industry to another, and from one company to another. For some companies, taking on debt will not alter the market cap what-so-ever. Apple for example, viewed as an extremely healthy company with massive earnings, can take on debt without it denting their market cap in a negative way.

w1ntermute 12y ago

I wonder if the rest of the Sinosphere will eventually suffer from the same sort of economic malaise as Japan, once they reach first-world status. They all have hierarchical cultures that make creative destruction difficult. So while they can quickly catch up to the West through efficient social organization, they can't break them down and replace them with something better.

dmix 12y ago
Counter to most western thought, you can in fact have heavy social control but small-government in terms of economics ala Singapore and have a country make rapid economic process. China's CRC can loosen their grip on business, or selectively ignore it often enough, while still maintaining heavy control of culture and social issues, while still maintaining high growth rates. As we've seen in the last few decades. It didn't seem to stop them previously, why would they try now? Other than civilian revolt which is non-existent in China.
- w1ntermute 12y ago
  > you can in fact have heavy social control but small-government in terms of economics ala Singapore and have a country make rapid economic process. Singapore's rapid economic progress is due to anything but small government. If you read Lee Kuan-yew's memoirs, you'll see the lengths to which the Singaporean government went to kowtow to Western (and later, Japanese) multinationals. They rolled out the red carpet over and over, for years, before any of those companies made significant investments in Singapore. Also, there are several reasons why generalizing the Singaporean experience to Sinosphere countries doesn't work: 1. Although Singapore has a lot of ethnic Chinese, the country is inherently multicultural and has adopted many British cultural traditions and practices. 2. The country is very small, making social control much easier than in a country the size of China. 3. Lee Kuan-yew himself has said that the Chinese government won't be able to maintain social control as the Chinese population migrates to the cities[0]. The system will have to change, and that will be very difficult. 0: https://www.youtube.com/watch?v=TlkPuamwrlg#t=2m52s https://www.youtube.com/watch?v=TlkPuamwrlg#t=2m52s

a_c_s 12y ago

Given that China's population is 10.8x Japan's, this seems inevitable. Is there more to this that make it notable that I'm missing? Source: https://www.wolframalpha.com/input/?i=china+population+%2F+japan+population https://www.wolframalpha.com/input/?i=china+population+%2F+j...

melling 12y ago
I don't think a country's size correlates to its stock market size. http://www.internetworldstats.com/stats8.htm http://www.internetworldstats.com/stats8.htm So, I don't see why you would think that's inevitable.
- tormeh 12y ago
  How does it not? I guess companies can trade their stocks at foreign exchanges, but over time that should cease. Assuming that productivity per person becomes more than half what it is in the US and that Chinese companies will trade their stocks in a domestic exchange it does indeed seem inevitable. Those aren't very wild assumptions.
  - justincormack 12y ago
    "over time that should cease" why? companies are globally owned, listing is largely about which accounting rules and disclosure and ownership rules you follow, no need for a home bias in the long run. Look at London for an example of a stock exchange largely full of international companies.
- Alphasite_ 12y ago
  Given countries or reasonably similar per capita wealth it stands to reason that they stand reasonably close together.
lkrubner 12y ago
By that line of reasoning, India's stock market should be the same size as China's, and both China and India should have a stock market that is 4 times bigger than the USA. But that is not going to happen.

enntymes 12y ago

http://m.youtube.com/watch?v=DeQ_wfUBjws http://m.youtube.com/watch?v=DeQ_wfUBjws