Profits may lie where only fools fear to tread

The market kept rising, even though China's economy was at a quarter-century low, even with a flood of new share listings, even though many valuations were reaching to the sky.

I was dumbfounded to see that many so-called technology stocks, which have led the rally, are trading an average of 220 times earnings. That is the most expensive globally, and it dwarfs the price-earnings ratio of 150 for their United States peers recorded when the Nasdaq Composite Index peaked in 2000 and the dotcom bubble burst.

All technical indicators pointed to a plunge, or at least one decent correction, like in all previous bull runs, like in other world markets.

But the market just kept surging, setting four-, five-, six-, and seven-year highs almost every day. In less than a year, the index has more than doubled, making it the world's most bullish.

Some have attributed the frenzy to the central bank's cuts in interest rates and required reserve ratios for lenders. But were not those meant to ease liquidity strains on enterprises and support the real economy?

Others have said that the "Belt and Road Initiative" will bring unlimited business opportunities to Chinese companies across the globe. But the endeavor to promote regional connectivity and trade is just starting. It is far too soon for share prices to reflect any gains.

And uncertainties abound in doing business abroad, as illustrated in Chinese enterprises' many soured investments in the developing world that have led to huge losses.

All the positives, it seems to me, are on a shaky foundation.

But I forgot the first principle of trading: The trend is your friend.

I had sold most of my holdings, so I could only stand on the sidelines as the carnival of wealth passed by, slack-jawed as the unbridled bull market raged ahead with daily transaction volumes that surpass Wall Street and reach totals that exchange computers cannot handle-almost like the ticker-tape machines of 1929, which ran hours behind trading.

It is incredible, absolutely incredible.

Why not rejoin the party? But then I would be breaking the taboo against "sell low, buy high", a trait of all investment losers.

I give up. I do not "get" the market. It scares me.

For those who are still in, I can only wish them luck.

Contact the writer at huangxiangyang@chinadaily.com.cn

(China Daily 04/29/2015 page14)

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