Real Cost of Chinese Stocks Dwarfs 2007 Bubble

Chinese stocks are getting a lot more expensive than the benchmark Shanghai Composite Index suggests.

Using the most-watched mainland equity gauge as a guide, an investor might conclude that valuations are pricey, though still within reason: the index trades near a five-year high of 19 times estimated earnings -- well below the level of 36 reached during the 2007 bubble -- and in the same ballpark as the Standard & Poor’s 500 Index’s multiple of 17.