Yeah, sorry, but this headline, “Chinese stock market bigger than Japan’s” in the FT today caught my eye. I immediately took this to be a negative thing, which shows you what a fun person I am. But wait, I’m not so crazy, read on.

The FT story begins as follows:

The Chinese stock market is now bigger in terms of market value than the Japanese market if Chinese companies listed in Hong Kong are taken into account, underlining the dramatic surge in the country’s financial markets over the last 18 months.

OK, two caveats there that should not be ignored, particularly the one about Hong Kong. The article then goes on to explain where my negativity comes from:

While many analysts on the mainland argue that the continued surge in the market is a reflection of the underlying strength of the economy, overseas analysts view the fact that the Chinese market is now worth more than the Japanese as a further sign that mainland stocks are dangerously overvalued. “It just goes to show what a huge bubble has been created,” said Fraser Howie, author of a book on the Chinese market who compiled the data. “All reality has been suspended in China.”

I’ve never claimed to be an expert on stocks or any other financial instruments (I like using that latter term, by the way, makes me feel like I have an MBA and own a vacation home somewhere). On the other hand, doesn’t it just feel palpably wrong that China’s stock market should be valued higher than Japan’s at this point in time? Sometimes that “it just doesn’t feel right” analysis can be quite valuable.

After that, the FT article downshifts into the usual “Is it a bubble?” argument, with carefully chosen Chinese analysts saying that things are sustainable, and quotes from foreigners saying that the market is a house of cards. Nice how they line up the viewpoint with a particular nationality/race, huh?

Powered by ScribeFire.