I will preface this entire discussion by saying I am not an expert on China. I do not know a word of Mandarin (or Cantonese for that matter), I do not know the names of more than 25 Chinese companies, and I have never been there. I do, however, know a fair amount about Chinese history and Chinese economic development. As there are a few of you that know more about certain aspects of China, I welcome your input.
Of course, when any economy is growing 11% a year, there is a great temptation to want to invest in that country's markets. With China, where the economic prospects seem so favorable, this is particularly true. However, historically the Chinese stock market has proved a treacherous mistress. For most of the ten years leading up to 2006, Chinese stocks, measured by the CSI 300, did not do particularly much of anything even while the economy boomed. Then, between 2006 and early-2008, Chinese stocks increased nearly six fold, one of the most powerful rallies by a major economy's markets in history. Then, over the next ten months, stocks fell 73%, wiping out most of the gains of the past three years. Over the ten months from October 2008 to August 2009, stocks rallied by better than 100%, out-pacing most other markets.
Since then, however, China has been an unusually poorly performing market, even rivaling some of the troubled European markets. The CSI 300 has fallen from 3,750 in August to 2,762 now, making it one of the few bear markets anywhere in the world. Its best proxy listed here, the
I am agnostic on the debate for now, though I lean heavily in the direction of
playing companies that trade in more open capital markets with more mature
financial disclosure. What do you all think?
Regardless, I think this will be on ongoing debate for some time.