Thursday, February 01, 2007

Even commies have bubbles?

Don't Bet on China's Collapse (subscription)

Guambat doesn't have a subscription but likes to click the link to see smarmy Jim Cramer. But whatever the article had to say which might have corroborated the headline would be interesting reading in light of other stories of the day.

Irrational exuberance? China's stock market is soaring
Less than two years after a crash that disillusioned many Chinese, China's stock markets are almost going mad. The leading Shanghai Composite Index is approaching 3,000, and Chinese investors are flocking to buy shares in record numbers.

The bull market is so powerful -- the Shanghai market hit a record high last week and was among the best performers in the world last year -- that one senior Chinese official has warned against "blind optimism."

College students, young professionals, retirees and others are buying individual shares or investing in China's swelling mutual funds. One mutual fund raised $5 billion in a single day.

Day trading, meanwhile, is becoming popular with investors, many of whom monitor the market from home on personal computers.

The run is particularly striking because China's stock markets have historically been stagnant financial backwaters, marred by scandal, weak oversight and fundamental contradictions.

Even as China's economy has roared, the stock market has rarely inspired public confidence or great interest. China's markets nearly disintegrated in 2005.

Many Chinese investors are leaving the bubbly national real estate market and moving money into stocks. Roughly 2.7 million new investment accounts were registered last year, more than triple the number from 2005.

The result is an almost goofy buying binge that many analysts expect to continue.

"We've gone from a historic low to a historic high in the space of a year," said Stephen Green, a senior economist with Standard Chartered Bank in Shanghai who specializes in China's equities markets. "Obviously, everyone is getting a bit scared about the scale of the ramp-up."

In Shanghai, one of the most popular local television programs is "Stock Market Today."

Shares plummet in 'overvalued' market
"Such a short-term correction will not change the long-run bull sentiment," said Qiu Zhicheng, a Haitong Securities Co analyst. "It is wise to buy into some quality shares amid the correction if investors are seeking long-term returns, rather than short-term speculation."

China's Stocks Tumble Most in 21 Months on `Bubble' Warning
Only 30 percent of companies listed on the Shanghai Stock Exchange "are good to invest in by Western standards," and investors in the remaining 70 percent will probably lose money, Cheng Siwei, vice chairman of the National People's Congress, said yesterday at a conference in Dubai.


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