Loungin

The Difficulty of Investing in China

I'm a PE guy and think in terms of EBITDA multiples. If you just look at the fundamentals of FXI's holdings (finance.yahoo.com/q/hl...) the average EBITDA multiple was 9x at the end of Feb when it was trading at 145. FXI prices have contracted 10%+ since then. Hell, we pay 8-10x for businesses in the U.S. in the PE world all the time, and that's the private sector. For public stocks to be trading in that range (a lot lower now due to contraction) in a super high-growth country such as China is crazy. I would buy that all day long. Companies in the states trade at 10x+ and they are in low to medium growth sectors. I continue to buy JAN 2010 FXI calls at 140 as the price continues to fall. I think it's a bargain, despite the olympics, inflation, etc. If our fund had the opportunity to buy diversified, high growth companies at 8x EBITDA we would be all over it.