Signs are being put up all over the places for the biggest bubble of the century to burst now....yes, I'm talking about China. The clearest sign came in Monday, when the multiples of Chinese stocks are going ever higher, while a batch of H shares are revising down their estimates for next year. When P/E ratios is going higher, while companies are putting up lower numbers, that is a classic sign of a bubble. The market is flushed with liquidity, and high hopes, instead of reason and educated investing.
Today, a simple discussion of combining S shares and H shares, sent Chinese stocks down and Hong Kong stocks up. These HK stocks, are really the same companies as the S shares, but available to everyone. So in reality, the same company's stock is down inside mainland exchange, and up in HK exchange. If you think that makes no sense, you are absolutely right. It is not unwise to sell your Chinese stocks and ETFs now...rather than be caught when the biggest bubble of the century bursts.
Some argues that the authoritarian government will not allow the stocks to go down prior to the summer Olympics. While true to a certain degree, I am not sure how much they are willing to do, given their market has gone up more than 10 times in 4 years. Unless you bought into China 4 years ago, there are a lot of room for the stocks to "correct". But, hey, one can always keep their fingers crossed.
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