(no subject)

[randomness]

I missed this post when it came out. The Chinese stock markets are really booming. It's like 1929! or 1999.

Deutsche Bank, quoted in FT Alphaville:

Bubble watchers point out median earnings multiples for Chinese technology stocks are twice US peer valuations at their dot.com peak. More worrying perhaps is a health-goods-from-deer-antlers producer on 70 times, the seamless underwear manufacturer on 90 times or those school uniform and ketchup makers on 330 times!

From the same article in Alphaville:

It seems everyone in the country is racing to open a brokerage account – 1.67m new accounts in the latest week, according to the China Securities Depository and Clearing Co. That sounds a lot, although it is growth of only about 1 per cent a week in the total of new accounts: China, remember is big.

They go on to make some comparisons between the current state of the Shenzhen and Shanghai markets and that of the Russell 2000.

"Past performance is no guarantee", etc. I wonder when the music's going to stop?

Comments

[achinhibitor.livejournal.com]

I think it's worse than that. The last phase of a bubble is when a class of players that normally isn't in that market starts coming in. (E.g., in the three booms in big US office buildings, the "last fools" were foreigners, Britons the first two times and Japanese the last time.) Part of what drives this is when the experienced players start realizing that the market is going to crash and they start looking for greater fools to sell to. So I suspect that many of the more sophisticated and connected players are getting out of the Chinese stock market and much more ordinary folks are getting in. The government can say what it wants, but the best-connected folk are probably cashing out right now, and the herds are one day going to panic and run. And there's a longstanding Chinese belief that there are runs of luck, which can apply to particular stocks as easily as to particular roulette wheels, and that if a stock is lucky, it's worth betting everything on it. That means that the herds are going to rush in to a hot market without much concern for the increasing risk of a crash.