huangthomas

Anatomy of a Chinese Bubble: A Checklist For Spotting Bubble Tops

A cogent question to ask is how collapse (just assuming it may happen) of A-share market is going to affect: 1 H- and ADR markets, where the great majority of American investment are. 2. The world market. The Shanghai Stock Market Composite Index dropped 8.8% on Feb 28 was followed by a world wide correction, including H- and ADR-market. It was based on fear, but not on careful consideration. Chinese, with $2.5 trillion in bank saving, are not allowed to invest outside of China. Recent approval of $10 billion for QDII to invest in New York & London stock markets has not been wholly implemented yet. Collapse in A-share market has little effect on capital invest in the markets outside of China, because there are none. When Shanghai stock market index dropped 6.5% on May 30 following tripling of stock transaction tax from 0.1% to 0.3%. 6.5% correction in Shanghai was treated as a non-event by the rest of the world. H-share and AD-Rs market only felt a minor Jolt. After Chinese workers lose all their saving, they may be more willing to go back to work for a lower wage and cheap Chinese good will keep coming to the American shore.

Anatomy of a Chinese Bubble: A Checklist For Spotting Bubble Tops

There are 4 stock markets in China. Extrapolate A-share market to B-, H-, ADR......make that much sense? Each valuation of the same stock share in 4 markets are different. B-share market valuation is only one-tenth of the A-share market. If A-shares carry a P/E ratio of 50, B-shares are only 5. Is PE of 5 too expensive in markets which the share earnings increase, on average, 40% from 2005 to 2006 and the Q1 earnings increase 100% (yoy). (A word of caution: don't buy B-shares because of liquidity problems). H-shares and ADR are priced modestly at 15-20. And again, are they too expensive? Despite crying of wolf, fire, bubbles........... Chinese Index ETF of China H-share (FXI) and ADR (PGJ) keep rising, why? I think American investors have their own mind, unaffected by chicklittle, such as GS....... Only A-share CEF (Morgan Stanley's CAF) suffer a --20% (from+20%) discount from +20% premium, with a total drops of -40%.