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Bloomberg: U.S. Companies Outpacing China Stocks

A new Bloomberg report reveals that U.S. companies are dominating the publicly traded landscape more than at any time in the last decade – and many of them are replacing China firms.

Among the 500 most valuable companies in the world, 171 of them are based in the U.S. – up from 159 companies three years ago.

More impressively, the market capitalization of those 171 firms is a combined $10.6 trillion – or roughly 40% of the S&P 500’s total market cap. That’s up from $8.24 trillion in 2009.

Fifteen of the 20 most valuable publicly traded companies are based in the U.S. Only 24 Chinese firms cracked the top 500, down from 34 three years ago.

Improvements in the U.S. economy have certainly had something to do with the country’s growing presence among the top 500.

The auto industry, housing market and unemployment rate have all recovered nicely since the depths of the recession in early 2009. As a result, the S&P 500 – the benchmark U.S. index – has doubled since reached a 12-year low in March 2009.

Meanwhile, China stocks have gone in the opposite direction. The Shanghai Composite Index hit a three-year low today, and has fallen 6.5% since March ’09. The benchmark Chinese index is down 11% in 2012 alone.

What’s baffling is that China’s stock market is tanking at a time when its economy continues to grow. According to Bloomberg, China’s largest companies increased their earnings sevenfold over the past three years – more than double the rate America’s largest companies have increased their earnings. Its economy is projected to expand 7.7% next year, more than triple the 2.2% growth expected in the U.S.

So this means two things: 1) that China stocks are cheap right now in comparison to earnings, and 2) investors are quicker to buy U.S. companies even when they’re growing at a significantly slower rate.

For all its growth, China – now the second-largest economy in the world – is still burdened by the “emerging market” label. Fair or not, U.S. stocks are still considered a much safer investment.

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