Word: shanghaiing
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...optimism. That unquestioning faith in the ability of China's soaring stock market to defy gravity has become worryingly common among Chinese investors-so common that market observers and government officials are warning that a market correction might be on the way. Emboldened by a 130% rise in the Shanghai Composite Index last year-which made Shanghai one of the best-performing exchanges in the world-starry-eyed speculators and first-time punters like Du have been storming into Chinese stocks, ending the market's five-year slump and in recent weeks pushing daily trading volumes to all-time records...
...Take the country's largest life-insurance company, China Life, which trades in Shanghai, Hong Kong and New York. On Jan. 31, China Life shares had a price/earnings ratio of around 70 (a stock's P/E ratio measures the amount investors are paying for every dollar of per-share earnings). That's a richer multiple than investors are shelling out for fast-growing Google, the investing world's flashiest Internet phenomenon. Nor are high prices confined to just a few Chinese stocks. Webb estimates the average P/E for so-called "A" shares (stocks available to mainland investors on China...
...similarities, such as a frenzy for initial public stock offerings. As investor demand for Chinese stocks has intensified, so has the list of mainland companies eager to cash in on the mania by going public. In 2006, Chinese companies raised more than $53 billion in the Hong Kong and Shanghai markets through IPOs and secondary share offerings, up from $24 billion the year before. Among them was the largest IPO in history, November's $22 billion listing in Hong Kong and Shanghai by Industrial and Commercial Bank of China (ICBC). Despite the fact that Chinese banks are known for their...
...this is a bubble, is it about to burst? Maybe not. Peter Alexander, chief analyst for Z-Ben Advisors, a Shanghai investment consultancy, says Chinese companies are stronger and more efficient than they were a few years ago. "It's dangerous to bet against China," he says. Also, if you exclude China Life and banks that fueled last year's blockbuster IPOs, Shanghai stocks trade at prices comparable to those of Asian companies listed on other regional bourses. In fact, some of China's smaller manufacturing and textiles companies are still relatively undervalued. "Judging from history, the stock market doesn...
...dotcom boom of the late 1990s nor even Chinese investors in the early 2000s. The history of investing demonstrates that there is no faith stronger than that of newbies plunging into a molten market. And that certainly describes China today. Emboldened by last year's 130% rise in the Shanghai Composite Index--which made Shanghai one of the best-performing exchanges in the world--first-time punters like Du have been storming into Chinese stocks, ending the market's five-year slump and in recent weeks pushing daily trading volume to new records. They are ignoring the stop signs raised...