As Markets Worry Over Xi Jinping, 'Big Short' Fame's Michael Burry Notes Drastic Drop In Hang Seng Valuation Despite GDP Surging 18x From 1997

On Monday, Hong Kong’s benchmark index Hang Seng fell below the 15,000 mark for the first time since April 2009 as investors continued to flee mainland Chinese stocks following President Xi Jinping’s historic consolidation of power.

What Happened: "The Big Short" fame investor Michael Burry tweeted his take on the index, explaining how Hang Seng valuations have dropped significantly compared with figures in 1997. Burry observed that the Hang Seng index recently hit levels similar to where it was 25 years ago; however, valuations have declined considerably with earnings falling to seven times, compared with 25 times back then, despite GDP ballooning by 18 times.

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He also noted that other valuation parameters like enterprise value-to-sales and tangible book value have also declined in the period.

“Meet the new boss, same as the old boss. The Hang Seng recently hit 1997 levels. 25 years. Yet GDP multiplied 18 times during that time. 1997 valuations were 20x Earnings, 10x EV/Sales, 3x Tangible book. Now 7/1/1. Note, 3 of last 4 Premiers served 3 terms,” Burry tweeted.

The Hang Seng has lost nearly 33% since the beginning of the year. Major U.S.-listed Chinese companies like Alibaba Group Holding Ltd BABA, Tencent Holdings TCEHY, Nio Inc NIO, Xpeng Inc XPEV among others, too, have lost sheen in this year’s market rout.

The legendary investor, who bet against the housing market in the run-up to the financial crisis of 2008, has regularly voiced his opinion on markets and investing.

On Oct. 3, Burry criticized passive investing saying it has steadily inflated over the last decade and the only way to get out of the "overcrowded theatre" is "by trampling each other."

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