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HIGH
NOON FOR CHINA EQUITIES? A day does not pass without advice telling me to invest in China. The facts speak for themselves: massive growth, massive industrialization, massive urbanization, massive privatization. We cannot afford to miss out! One cannot deny the facts. However other facts come to mind….like massive booms in a puffed up financial systems leads to…. have we forgotten? My best advice comes from the charts, and a brief look at a few of the issues and indices that track this boom all suggest the same thing. The Shanghai Composite
It has been a great run from June 2005, with three significant cool offs on the way up. However the ever steeper trend lines mark an exponential growth in equity valuation (yes, just like the NASDAQ in the dot com days), so look out below for the next sell off! The Hang Seng Index
Another stellar performer, but have you packed the chute? iShares FTSE/Xinhua China 25 Index (FXI)
The charts all show a boom. The important question is: for how much longer? Excess knows few limits, so one has to be careful as to how even the best technical tools are applied. We expect FXI to top at $92.83, but an overshoot would not surprise, and timing cycles suggest change toward the end of Dec. 2006.Currency exchange rates may also come into play allowing an arbitrage window between the various China related markets. I must confess it’s getting too hot for me. I’ll be by the pool sipping a few cool ones and watching the action. Good luck to those brave ones who can hold the course!
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