Is the Chinese bull market over?

(Update Nov. 17) Shuipi of ChinaTimes(水皮华夏时报) wrote this interesting piece on his newspaper.

(Original) It looks like it, from the highs at 6,200 in early Oct to 5,200 now. But wait a minute, recently the US stock market suffered big loss because of the sub-prime meltdown, and weakening of the dollar. How could the mess in the US drag down the Chinese stock market?

Well, one can say we are in a global economy now, the ripple effect of US sub-prime meltdown means the US business and consumer will watch their wallet more carefully, which is bad for Chinese exporters. We all know the Chinese economy depends a lot on exporting to the US.

China Mobile logo

This argument is true and popular among mainstream, but it ignored two things: 1) China is becoming less and less dependent on exporting to US, in other words, in the past few years, China is diversifying the destinations of its exports, from Europe to South America, Middle east, etc. 2) The domestic consuming is also growing fast, from automobiles, to real estate, to consumer goods. Note China Mobile is talking with Apple to launch the iPhone? Those things are unthinkable in the past.

That being said, I won’t blindly bet on the Chinese market (a.k.a., the FXI index fund in traded in the US). I think there will be some winners, and some losers now that Shanghai composites index is above 5,000; that’s a 100% gain from the beginning of the year.

This thesis can also be confirmed by the recent Chinese ADR IPOs performance in the US. I am only talking about companies with sustainable business here. For me that exclude online gaming and solar energy companies except SunTech Power(NYSE:STP). Some companies like Mindray (NYSE:MR) still hold its grounds amid the across board sale; while new IPO companies such as E-House (NYSE:EJ), Longtop (NYSE:LFT) Wuxi Pharma (NYSE:WX) dropped more quickly from its peak.

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