rlirph

"Wu Li Re Xin" - Irrational Exuberance in Chinese

Thank you for a brilliant analysis using the traditional investment parametrics on emerging markets. I definitely would prefer to have more people like you to scare people not to invest in China. However I do appreciate that there should be more of you so that the valuation would be lower.

Many people with this outlook must think Bank Of America or Citigroup are idiots, investing US$1 billion in Chinese bank called Guangdong Development Bank and China Construction Bank. Except after two years both investments have tripled.

Another example is Alcoa $200 million investment becomes $2 billion in several years. Or take Warren Buffet's PetroChina investment which went up 7x already. But no one even talks about his stake at China Life or the more recent IPO's.

Americans like to talk about bubble because that is what we had in 2000. The difference was that back in those days, AOL, Amazon, and eBay companies made little money. You can not compare those companies with China Mobile or China Life. You should compare the internet more like China Digital TV(STV).

Did you know that with any emerging market there was a period of several years which the stock market went up several times in a few years? The same thing happened in Hong Kong, Japan and
Taiwan. With rapid appreciation occasional pullbacks are necessary.
Except with huge gains, the correction will also be big.

I have moved from LA to China for nine months. Unless you are here to see and feel the economic expansion, I suggest that one should stop using the traditioanl western parametrics (which was designed for developed markets) on emerging markets such as those in Asia or Russia or Brasil.