On The Difference Of Stock Valuation Between China And U.S.Capital Markets

Since the beginning of the 20 th century,some Chinese enterprises have chosen to enter more mature overseas capital market for their own development.These Chinese enterprises listed abroad are called China Concept Stock(CCS).CCS was initially sought after by all parties,but gradually its market value was shrinking due to the shorting of muddy water institutions and other reasons.At the same time,the situation of China's domestic capital market has rebounded,so some CCS sought to return to A-share market.In 2015,the first batch of CCS,such as Baofeng Group and Giant Network Group,returned to A-share market,and received popularity as soon as they went public.In a short period of time,their market value was more than several times higher than that when they were listed overseas.The high market value of the first returned CCS in A-share market attracted other CCS who thought their value was undervalued.In the following years,many CCS chose to go private and return to A-share market,which triggered a wave of returns.However,whether the high valuation of A-share market deviates from the intrinsic value of the enterprise,why the valuation of the same enterprise differs greatly between China and U.S.capital markets,and what impact the high valuation of A-share market will bring worth pondering deeply.In order to more accurately explore the causes and effects of the huge differences in stock valuation between China and the United States,this paper uses case study method to conduct depth analysis with Wu Xi App Tec as the case object.Firstly,this paper evaluates Wu Xi App Tec by valuation method when it was listed in A-share market and N-share market respectively,confirming that the valuation of A-share market is too high for Wu Xi App Tec and the valuation of N-share market is slightly low for Wu Xi App Tec.Secondly,from the perspective of capital market,investment targets and investors,this paper analyses the reasons for the differences in valuation,and the impact of high valuation of A-share market on enterprises,industries and China capital market.Finally,this paper puts forward some suggestions according to the phenomenon.Through the case study,this paper finds that there are three main reasons for the difference in valuation between China and U.S.capital markets.First,there are differences in the general environment of capital markets,including the collective trust crisis caused by the mature short hedge mechanism in U.S.capital market,and the damage of capital market pricing function caused by the imperfect delisting system in China.Second,there are differences in scarcity of quality investment targets.The scarcity of high-quality investment targets in China capital market and the return of well-developed CCS are more likely to be pursued and speculated by investors,which leads to over-valuation.Third,most of the investors in America capital market are institutional investors with strong value discovery and value mining abilities,they tend to pay more attention to the market value management of enterprises' products.However,most of the investors in China capital are retail investors,their data analysis and processing abilities are not strong enough and they are not rational enough.Therefore,they may pay more attention to whether enterprises have topics that can be speculated.This difference makes Wu Xi App Tec with insufficient research and development ability and unreliable products not be concerned and valued by the U.S.market.The difference of valuation has certain advantages for Chinese enterprises and industries,but in general,it still has more disadvantages than advantages.Therefore,this paper puts forward the following suggestions.First,China capital market should improve its delisting system by enriching delisting indicators,reforming ST system and improving the structure of multi-level capital market;Second,China capital market should relax its listing standards so that it can have more high-quality investment targets;Third,enterprises should pay more attention to market value management of products,focusing on their own development rather than market value,so that they can survive and develop in different capital markets.