Saturday, September 22, 2007

China stocks are too expensive

There is a report in the Straits Times on Saturday. It mentioned that some of the China stocks are traded in Hongkong and in Shanghai. The price in Shanghai can be up to 9 times of the price in Hongkong. This shows how highly priced it can be.

If you invest in a China fund, are you paying too high a price for these stocks? Will it continue to go higher? Or will it head for a crash?

I prefer to buy these stocks in Hongkong at a fraction of the price in China. When more people in China buy the Hongkong stocks (which are relatively cheap compared to China), the price differential should narrow.

However, the prices in Hongkong may still be too high (based on price earning ratio), compared to stocks in other parts of the world.

Lesson: If you do not know the market, it is best to avoid investing in the over-priced stocks.

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