rlirph

Get Ready for the Chinese Bubble to Burst

To me there are too many foreigners who make comments about the Chinese stock market without even understanding it. Just because the stock curves look like the US internet bubble of 2001 does not mean it is going to follow the same pattern. But I must say after such a ramp up, a pull back of 30-40% would only be normal, rather than a castatrophe.

Now with the 1st quarter 2007 results in, over 1400+ public companies reported net earnings growth of 45%+. We are not talking about PE of 1800 of EBay in 2001. China Mobile is still trading at a reasonable PE with a 25% growth rate. Look at Guangshen Railway it will continue to grow because it is partly owned by the government. From time and time, the government will divest routes to that company. The same can be said for China Life and Huaneng Power.

When the economy is growing at least 8%+ for the next five years, the big caps will grow their earnings at multiples of economy growth. Look at the earnings of BoaSteel, went up 154% from last year. It will not grow another 150%+ next year, but 20%-40% should be expected. This is something you cannot get with the US stocks.