Regarding the shorting, good point with the currency possibly going up. You rather short or buy puts in an account demoninated in RMB or maybe in Singapore dollars. Otherwise, if their market goes down and their currency up, you would still lose on being short a Chinese fund here.
Regarding the overall merit, I have no clue. I don’t even know the price-to-earnings in China. Anectotally, it certainly seems ripe for a correction. My friend is dissapointed with the 17% annual returns he made in the U.S. for the last years, because his China fund went up 60% in 1.5 years. He wants to keep his investment in China because he has a good gut feeling…
Hey, China might grow by 15% and have a few percent in earnings. But that wouldn’t justify any stock returns in excess of 20% annually. So the least I would do is stay out.
