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CHINA'S WILD, WILD WEST Add to ...

It was billed as China's answer to the Nasdaq stock market, but China's new ChiNext index is making the tech-heavy U.S market look staid by at least one comparison - price-to-earnings ratio.

The 28-company index based in Shenzen boasts a price-to-earning ratio of 96, compared with 35 on the Nasdaq and 33 on the Shanghai index. Blogger Paul Kedrosky calls the newly launched index China's "wild, wild west exchange" that makes even the Shanghai composite "look cheap."

Price-earnings ratio is a commonly used measure of value - the lower the number, the better value a stock or group is. Stocks with higher P/E ratios are riskier bets - the market is paying more for each dollar of earnings.

To calculate a price-to-earnings ratio, divide the market price of the stock or index by the earnings per share. For example, if a stock sells for $20, and posts yearly per-share profit of $4, the ratio is 5.

The ChiNext index offers private Chinese companies a chance to list their stocks, and marks a shift in the country's approach to markets. Its lofty valuations ensure it has a lot to live up to.

Here's a look at how the P/E ratios compare:

ChiNext 96

S&P/TSX composite index 16

S&P 500 21

Nasdaq composite index 35

Shanghai composite 33

Brazil Bovespa index 25

DJ Euro Stoxx 19

Sources: Staff, Bloomberg,

ChiNext

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