It didn't happen exactly as I had predicted, but it has
finally happened. And it means that the world's
fastest-growing stocksare available
for cheap.
Before I get to the whos, whys, and wheres, though, let me
tell you whom we have to thank.
Here comes the cabal
Although owners of heavily shorted stocks such as
Ford (NYSE: F) andÂ
Qwest (NYSE: Q) may disagree with me, short
sellers are crucial to healthy markets.
By making the case for stocks to fall, short sellers make
the market more efficient. Shorts temper excessive optimism
and help us all avoid the protracted painful corrections that
are its consequence.
Where shorts didn't tread
Optimism, however, had been the defining
characteristic of Chinese markets until 2008. Chinese stocks
gained 130% in 2006, and another 97% in 2007. As a result,
money moved into these markets at a remarkable clip, and
stories aboundedabout Chinese housewives, cab drivers,
and fishmongers speculating in the market.
Of course, there was nothing to stop them.
See, you couldn't short stocks in China. Without investors
scouring the market for weaknesses, those same housewives,
cab drivers, and fishmongers have been treated to nothing but
good news. That made them overconfident, overzealous, and
then overexposed to an unquestionably richly valued basket of
stocks.
It won't be that way for long ...
China's Security Regulatory Commission, fearing a
stock market crash, was reluctant to stop them. That's why
the country held off for so long on allowing investors to
short stocks.
But it had become so bad in China last year that the CSRC
finally approved shorting at the end of September. To me,
this indicates that the CSRC believed all optimism had been
purged from the marketplace. When that happens, we've reached
the point of maximum pessimism -- the precise time that
master international investor Sir John Templeton would have
told you to invest.
And you should consider that. Because even with the market
recovery, Chinese bellwethers such as
China Mobile (NYSE: CHL),
Baidu.com (Nasdaq: BIDU), and
PetroChina (NYSE: PTR) are available for
significantly lower multiples than what they were at in 2007
and 2008.
Get ready to buy
That's why you should be licking your chops.
China's rapid economic growth will be
theglobal economic story of the next 10 to 20 years.
The opportunities are huge, and the country is growing richer
by the day. In fact, our
Motley Fool Global Gains
international investing team recently returned from a
research trip to China, where we met with executives at
various companies and were generally impressed with how these
folks ran their companies. Continued... |