Why the whole world are shouting of bubbles in CHINA MARKETS?

Basically is because of the investors are paying high PE for the stocks they purchased! But how high is high that warrants the market to be considered as expensive or over valued??

The utmost important factor an investor should consider is the growth rate of the company he intends to invest.

China GDP is growing at the pace of around 10% pa. You can notice that a lot of China companies listed in mainland or Hong Kong are growing at the rate of 50 to 100 pct or even higher!

Let's do a case study:
Y company's 06 EPS is 10 sen. You buy Y at 50X of 06EPS. You pay $5.00
Y's net profit is estimated to grow at the rate of 50-100% for the next few years.

EPS for 07 will be 15sen(min) to 20 sen,
EPS for 08 will be 22.5 sen(min) to max 40 sen.
EPS for 09 will be 33.75 sen(min) to max 80 sen

That means you are buying the Y company at the prospective 07PE of 25X to 33X
That means you are buying the Y company at the prospective 08PE of 12.5X to 22.2X
That means you are buying the Y company at the prospective 09PE of 6.25X to 14.8X

Today is 31 May 2007.
Do you think is expensive to buy Y shares at 08PE of 12.5X to 22.2X and 09PE of 6.25X to 14.8X ???? Is it expensive??

You can hardly find companies with such a strong growth, but there are plenty in China and Hong Kong, especially the RED CHIPS and H Shares listed in HONG KONG. Furthermore, the PE is unbelievable low!! You don't believe? You can check it out PetroChina, CNOOC, ANHUI EXPRESSWAY, and so on.......Don't be lazy, do some study! you will be rewarded accordingly.HAHA!

DON"T MISS this golden opportunity. We are the witnesses of the history. The history of "AWAKENING of a GIANT"!

China: The BIGGEST CAKE in ASIA

China remains Asia's top market for financial services mergers and acquisitions (M&A ) because of underlying economic growth conditions, an annual survey by PricewaterhouseCoopers (PwC) suggests.
The opening of the financial sector late last year has also contributed to the faster pace of restructuring among domestic financial institutions and has prompted foreign banks to acquire stakes in domestic firms to gain a foothold in the Chinese market, PwC analysts said.
M&A activities are expected to expand from the banking and insurance sectors to stock broking and asset management, said the survey of 230 senior financial services executives across Asia.
At a press conference to introduce the report, PwC analysts warned that the fierce competition for assets in China requires discipline in pricing deals as China's financial services market becomes increasingly complex.
According to the survey, 47 percent of respondents said they will be involved in M&A activities in China either as principals or intermediaries in the next five years, down from 52 percent in 2005, said Matthew Phillips, PwC Transactions partner in Shanghai .
Ten percent of respondents said they would engage in M&A activity in Japan and 28 percent in Hong Kong .
In the commercial banking sector, corporate banking will continue to be the primary profit driver and opportunities include note financing, trade finance, treasury and cash management. Retail banking is possibly the most attractive banking segment in the medium term, the study said.
City commercial banks will be major targets of M&As, said Andrew Li, a transaction services partner of PwC in Shanghai. In the past few years, Huishang Bank and the Bank of Jiangsu have combined a number of city commercial banks with provincial banks, and foreign lenders are showing increased interest to own stakes in these smaller Chinese banks.
In a separate PwC poll of 40 overseas banks actively engaged in the Chinese banking market - including HSBC, Citibank and Standard Chartered Bank - respondents envision growing opportunities in China, and only a third said the market is overcrowded.
The 40 banks surveyed employ more than 16,700 people, and the number will surge 113 percent to about 35,700 by 2010, with 25 banks more than doubling in size.

How Long Will Bull Market Last?

(Xinhua)Updated: 2007-05-28 14:45
Economists are divided about how long the Chinese mainland's bull stock market can continue to charge ahead, with some arguing that yuan-denominated A-shares are overvalued, the China Securities Journal reported on Monday.
In my opinion, the benchmark Shanghai Composite Index could realistically hit 6,000 points in 2008", the report quoted Jin Yanshi, chief economist with Xiangcai Securities, as saying.
"The value of the A-share market would then be 24 trillion yuan (3.17 trillion U.S. dollars), equivalent to 96 percent of China's gross domestic product", Jin added.
Hua Sheng, president of Yanjing Overseas Chinese University, pooh-poohed Jin's prediction, saying the overheated market would not last long and that a 6,000-point index would require "a painful adjustment".
"Risks can be reduced if the government adopts a series of measures now to guide the stock market; otherwise the market will be unable to sustain the increasing risks," said Hua.
But the report quoted Jin as saying the biggest risk comes from government interference in the market.
Experience in the United States, the United Kingdom and Japan showed government interference would negatively impact the capital market, said Jin.
Zuo Xiaolei, chief economist with China Galaxy Securities, also expressed concern about the rising market values of listed companies, which she believes have grown out beyond their real value.
"Excess liquidity is generally thought of as a serious macroeconomic problem, but in fact it provides an opportunity to promote the Chinese capital market", said Wu Xiaoqiu, director of the Financial and Securities Institute, Renmin University of China.
"Bank deposits are flowing into the stock market at an unimaginable pace -- we are just on the threshold of a 10-year bull market", said optimist Han Zhiguo, director of Beijing Banghe Wealth Research Institute.

China MOF Seeks 15-20% market correction.

Deutsche Bank reckons the Chinese Ministry of Finance is aiming to achieve, by raising stamp duty, a 15-20% market correction that then turns into a more orderly market than of late. Notes decision is hardly surprising - such measures have been used to manipulate stock market sentiment since duty was introduced in 1992. However Deutsche says market could ignore the move and keep rising rapidly. If so, authorities could raise duty again, banks says. Alternatively the move might trigger a 40-50% correction, prompting government to reverse the hike, suggests DB. "The government''s purpose is to hit market speculation, not the broader economy, particularly just a few months ahead of the 17th Party Congress

Get ready to buy IF the Opportunity arise! Good Luck!

山雨欲来风满楼！

China market is going to experience a drastic correction this few days. This will also affects the whole asia markets, including US and Europe.

The correction is long awaited and welcome by the long term investors. 20%-30% adjustment from the peak is very much accepted.

Don't miss the chance to bargain hunt the stocks you like especially the blue chips like PetroChina, CNOOC, China Agri, and so on....

Please fasten your safety belt as the voyage is going to be rough.....

Largest gasfield discovery may be declared soon

By Wang Yu (China Daily)Updated: 2007-05-29 08:26
PetroChina, the country's top oil and gas producer, is soon expected to announce China's largest natural gas discovery, which may surpass Sulige and Puguang gasfields in terms of reserves, according to industry experts.
"PetroChina is to announce a major natural gas discovery that's even richer than our Puguang gas field. The new gasfield is also located in Sichuan Province," a source in Sinopec told China Daily yesterday.
The new find, known as Longgang gasfield, has two to three times the reserve of Puguang, run by Sinopec, said Han Xuegong, a senior consultant with China National Petroleum Corporation (CNPC) , PetroChina's parent company. "That makes Longgang China's top gasfield," Han said.
China's current top gas field, Sulige, in the Inner Mongolia Autonomous Region, has proven reserves of 533.6 billion cubic meters. Puguang gasfield in Sichuan Province boasts a proven exploitable reserve of 356 billion cubic meters, being the country's second-largest, said the Ministry of Land and Resources earlier this year.
The Longgang gasfield will definitely surpass Puguang in reserves, but PetroChina is still trying to determine the final reserve figure, said Han.
Han guesses the official announcement about the new discovery might come next month.
A senior manager of PetroChina, who did not want to be named, confirmed to China Daily that a major natural gas finding is to be unveiled soon. But he wouldn't elaborate.
China's natural gas production is expected to reach 92 billion cubic meters by 2010, while demand will cross pass 100 billion cubic meters by then.
"The gap between supply and demand is to be bridged by either an increase in local production or imports. Of course, local supply is a more secure option," Han said.
Sichuan Province boasts robust potential in natural gas exploration and production. With exploitable reserves hitting around 700 billion cubic meters, the geological reserves of Longgang is likely to exceed 2 trillion cubic meters," Han said.
Officials of Dazhou, Sichuan Province, announced during the weekend that a total of 3.8 trillion cubic meters of natural gas deposits have been found in the western part of the Sichuan Basin.
The reserves at Dazhou include proven exploitable reserves of newly discovered 244 billion cubic meters - China's total production in around four years - and the already-announced 356 billion cubic meters in Puguang gas field. Both PetroChina and Sinopec are tapping gas reserves in Dazhou.
Although it will take some time for the new gasfields to come on stream, it will boost China's energy supply and enhance the country's energy efficiency in the long run, Han said.

PetroChina's Balance Sheet

PetroChina 0857
Balanced Sheet (RMBMn)12/06 12/05 12/04 12/03 12/02
Fixed Assets 645,337 563,890 485,612 427,875 397,798
Investments 35,010 13,608 11,504 7,410 5,680
Current Assets162,222 175,895 122,253 86,17475,164
Other Assets 29,594 24,674 19,078 10,276 4,507
Total Assets 872,163 778,067 638,447 531,735 483,149
Share Capital 179,021 179,021 175,824 175,824 175,824
Reserves 407,656 336,368 251,949 180,789 140,852
Equity 586,677 515,389 427,773 356,613 316,676
Long Term Debt 35,634 44,570 44,648 41,959 60,655
Other Liabilities 69,973 64,270 35,501 19,134 16,465
Current Liabilities 179,879 153,838 130,525 114,029 89,353
Major Items (RMBMn) 12/06 12/05 12/04 12/03 12/02
Inventory 76,038 62,733 47,377 28,872 28,441
Cash on Hand 54,070 86,024 12,704 13,871 12,589
Short Term Debt 35,763 28,689 34,937 28,890 20,633
Total Debt 71,397 73,259 79,585 70,849 81,288

Earnings Summarry

PetroChina 0857 (HKD 10.02)
Earnings Summary 12/06 12/05 12/04 12/03 12/02
Net Profit (HKDMn) 142,238 128,228 97,965 65,674 44,255
Net Profit Growth (%) +10.90 +30.90 +49.20 +48.40 +3.20
Earnings Per Share (HKD) 0.795 0.725 0.557 0.374 0.252
EPS Growth (%) +9.50 +30.20 +49.20 +48.40 +3.20
Dividend Per Share (HKD) 0.358 0.325 0.249 0.168 0.113
Price Earnings Ratio (%) 12.61 13.81 17.98 26.83 39.81
Dividend Yield (%) 3.57 3.24 2.48 1.68 1.13
Dividend Payout (%) 45.00 44.80 44.60 45.01 45.01
Book Net Asset Value (HKD) 3.278 2.768 2.295 1.913 1.699

BUY PetroChina(857.HK) HKD 10.02 TP 12.80.

STOCK CALL: Merrill Lynch says PetroChina''s (0857.HK) improving operational outlook justifies Buy rating, keeps HK$12.80 target. Notes 4 catalysts:

1. fast reserve growth from onshore China,
2. strong growth in natural gas sales,
3. pricing reforms of domestic oil and gas,
4. overseas output likely to double in 5 years.

Based on target price, total potential return over 29% (including 3.8% dividend yield); "it is looking much more attractive."

You Will Never Regret buying into such a bluest of the blue chip. It is trading at the PE of about 10.6 X of 07EPS. Unbelievable!!! SHOW ME THE BUBLE!!!!!

If You buy IRIS, bubble is everywhere........

Recently, there are so many experts warning about the China stock markets' bubble forming. Big features like Li Ka Sing, Alan Greenspan also joined in the wagon.

Is it true that China stock markets are bubbles?

If this is true, than bubble is everywhere !!

The critical point I want to stress here is "you are hiding no where if the China markets burst!" This is already proven during the recent crash immediately after the Chinese New Year.

So, due to the potential burst of the bubbles, should we just cash out and stay sideline??

My piece of advice is never try to predict how low or how high the market can be. It is like sitting beside a mad man, you don't know when you will be hit! This is the nature of the stock markets. The only thing we can do is to take calculated risk. No risk no gain!!

There are still plenty of stocks trading at a very attractive level. Example: PetroChina(0857.HK) , CNOOC(883.HK), ANHUI Expressway(995.HK) and the list go on.....