Editor's note: This column was submitted by Stockpickr member Faisal Laljee, author of StocksandBlogs.com.
I hate to be a party pooper, but the Shanghai Stock Exchange and the excitement surrounding all the recent China stock IPOs reminds me of the Nasdaq exuberance of 2000.
Granted, China is growing at a 10% pace, but does that justify the 80 multiple currently sported by the Shanghai Stock Exchange, especially when compared to the meager 16 multiple of the S&P 500? We may be seeing hints today of a more rational market to come -- check out Bubble Fears Circle Chinese Tech Stocks from this morning.
It seems as though every day, all day, I see new tickers scroll across my TV screen representing new companies I've never heard of: China Digital TV (STV - Cramer's Take - Stockpickr), China Natural Resources (CHNR - Cramer's Take - Stockpickr - Rating), China Finance Online (JRJC - Cramer's Take - Stockpickr - Rating) ... the list goes on. Many have no history of earnings.
The Chinese market is up 110% so far this year and more than 200% since January 2006.
Even stocks like China Mobile (CHL - Cramer's Take - Stockpickr), China Telecom (CHA - Cramer's Take - Stockpickr), China Life (LFC - Cramer's Take - Stockpickr) and Baidu (BIDU - Cramer's Take - Stockpickr - Rating), stocks that actually have an earnings history and have some claim to investor confidence are up like the Ciscos (CSCO - Cramer's Take - Stockpickr - Rating) and Aribas (ARBA - Cramer's Take - Stockpickr - Rating) of the tech bubble.
I don't know when the party will end, but it will definitely end unless we see a near-term, decent-sized correction. And when it ends, I would hate to be holding anything that starts with the word China.
My recommendation: If you are a gambler, keep betting on China until one day you lose a lot of money. Otherwise, reduce your exposure to China (note I say "reduce" because I don't know when a top will come -- nobody does).
Go long Russia (RSX - Cramer's Take - Stockpickr), India (IFN - Cramer's Take - Stockpickr), South Africa (EZA - Cramer's Take - Stockpickr - Rating), France and even Indonesia.
