Re: I want to go long china
 

I'm building a position in an underfollowed low volume chinese stock that's listed on the NYSE. Great growth and super cheap. I might make a thread about it next week.

Re: I want to go long china
 

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Don't invest in China right now, you will lose your shirt

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So short china? That market is moving, its either going to keep going way way up or its going to go down, i dont think anybody is predicting anything but that.

Why not go long w/ a tight stop/loss, then short the market when it crashes?

The fundamentals for the country are strong, and the PE ratio's aren't that out of whack with what they should be considering the phenomenal growth that country is going to have.

Even if there are some more one day crashes (like happened recently...though it rebounded strong), the market should go nowhere but up in the next 5, 10, 20+ years.

Care to rebut any of that? Feel free to use more than 5 words this time.

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Ok, You asked for it...
Chinese stock bubble

I read in the above article that Chinese stocks are trading at 40x earnings. I realize the Chinese economy is growing faster than the US, but an average PE of 40 is ridiculous.

If most people are willing to accept a 10% ROI annually, the PE ratio for a no-growth stock should be about 10. The Chinese economy has averaged a growth rate of 9.4% over the last 25 years. Because of this, it has become the 4th largest economy in the world. It will become harder each year to maintain this pattern of growth. And even if it can sustain 9.4% for another 25 years, that still doesn't really justify todays PE ratio in the Chinese market.

Re: I want to go long china
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Don't invest in China right now, you will lose your shirt

[/ QUOTE ]

So short china? That market is moving, its either going to keep going way way up or its going to go down, i dont think anybody is predicting anything but that.

Why not go long w/ a tight stop/loss, then short the market when it crashes?

The fundamentals for the country are strong, and the PE ratio's aren't that out of whack with what they should be considering the phenomenal growth that country is going to have.

Even if there are some more one day crashes (like happened recently...though it rebounded strong), the market should go nowhere but up in the next 5, 10, 20+ years.

Care to rebut any of that? Feel free to use more than 5 words this time.

[/ QUOTE ]

Ok, You asked for it...
Chinese stock bubble

I read in the above article that Chinese stocks are trading at 40x earnings. I realize the Chinese economy is growing faster than the US, but an average PE of 40 is ridiculous.

If most people are willing to accept a 10% ROI annually, the PE ratio for a no-growth stock should be about 10. The Chinese economy has averaged a growth rate of 9.4% over the last 25 years. Because of this, it has become the 4th largest economy in the world. It will become harder each year to maintain this pattern of growth. And even if it can sustain 9.4% for another 25 years, that still doesn't really justify todays PE ratio in the Chinese market.

[/ QUOTE ]

Sooooo???

Why does any of that matter if he is looking to take advantage of short term opportunities in that market?

Re: I want to go long china
 

He asked me about the long term. The short term can't be predicted. It could go down or up. There is no question that its overvalued though and in the midst of a speculative bubble. Because of this I would guess there is a greater chance of losing than winning.

Re: I want to go long china
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Don't invest in China right now, you will lose your shirt

[/ QUOTE ]

So short china? That market is moving, its either going to keep going way way up or its going to go down, i dont think anybody is predicting anything but that.

Why not go long w/ a tight stop/loss, then short the market when it crashes?

The fundamentals for the country are strong, and the PE ratio's aren't that out of whack with what they should be considering the phenomenal growth that country is going to have.

Even if there are some more one day crashes (like happened recently...though it rebounded strong), the market should go nowhere but up in the next 5, 10, 20+ years.

Care to rebut any of that? Feel free to use more than 5 words this time.

[/ QUOTE ]

Ok, You asked for it...
Chinese stock bubble

I read in the above article that Chinese stocks are trading at 40x earnings. I realize the Chinese economy is growing faster than the US, but an average PE of 40 is ridiculous.

If most people are willing to accept a 10% ROI annually, the PE ratio for a no-growth stock should be about 10. The Chinese economy has averaged a growth rate of 9.4% over the last 25 years. Because of this, it has become the 4th largest economy in the world. It will become harder each year to maintain this pattern of growth. And even if it can sustain 9.4% for another 25 years, that still doesn't really justify todays PE ratio in the Chinese market.

[/ QUOTE ]

Sooooo???

Why does any of that matter if he is looking to take advantage of short term opportunities in that market?

[/ QUOTE ]
Are you aware that this is the first mention of short term anything in this thread?

Also, let's say he is talking about short term. Sounds like you'll concede that an overvaluation (which we'll say a high PE is a proxy for) is a material concern long term. The long term is just a series of short terms, so who's to say it doesn't matter? If it's going to matter in x years what makes you confident it won't matter tomorrow or yesterday?

Re: I want to go long china
 

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The market "can" remain irrationally exhuberant for a long time. Greenspan was 3+ years early last time [img]/images/graemlins/wink.gif[/img]

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I will add to this excellent point that you are not the only one to discover this irrational exhuberance. Any puts you could acquire will be rather in demand. Also, keep in mind this is China and complex world politics (and militaries) are in play.

J

Re: I want to go long china
 

I would not go with China(FXI) right now.

IMHO, A better place would be Germany(EWG) or Canada(EWC). Both are doing about the same return with less risk than China.

Big Steve [img]/images/graemlins/cool.gif[/img]

Post deleted by Mat Sklansky
 

Re: I want to go long china
 

[ QUOTE ]
I would not go with China(FXI) right now.

IMHO, A better place would be Germany(EWG) or Canada(EWC). Both are doing about the same return with less risk than China.

Big Steve [img]/images/graemlins/cool.gif[/img]

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This post is just filled with holes. First, it should go without saying that what they've done doesn't matter and what they're going to do is the name of the game. There's a lot of things that bode well for China long term. So let's start with why Germany and Canada are going to do just as well. That's the easy question, so once you breeze through that we can start filling in the rest of your post.

Re: I want to go long china
 

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[ QUOTE ]
Both are doing about the same return

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O RLY?

Shanghai Composite Index

"The index has jumped more than 300 per cent in less than two years"

I don't think I need to even look up how Canada and Germany are doing (though in the case of Germany, I know thats a very strong economy now as well), to know they aren't having returns like that...


Also:

Valuations are currently at 37 times 07 earnings


helpful FT page about China

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So what should PE be? I don't know exactly what the S&P is at, but it's probably something like 18. So China is around double that. Obviously the two economies are very different, so just by nature of being higher it's not necessarily too high. Is 20 right? 25? 80? 12? e?