Wednesday, November 7, 2007

Beware the Great Fall of China

Beware the great fall of China
What brought the Japanese market to its knees were its own internal contradictions - the fact that the earnings were largely a fiction, and the share prices the result of an irrational buying frenzy from a population with nowhere else to put their money. That also should sound familiar to those currently playing the Chinese market. The earnings multiple there is 'onlyî 60 at the moment, but given that shares have already doubled this year, they should get to Japanese crash levels of 70 just the other side of Christmas. Then watch out.

There can be no doubt that this will happen - the only issue concerns the timing. The current level of dealing costs already exceeds the total profit of the quoted sector, so investors are already destroying their own capital simply by being in the market. They will realise this at some point and, too late for most of them, they will then try to take to the hills.

I'm a believer in the entire article, for what that's worth.

See Also:
Savvy Chinese Know Exactly When Bubble Will Burst!

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