China and 2008 Beijing Olympics: Are Chinese Stocks Too Expensive?

China Stock Market

Chinese stocks have been on an amazing tear during the past year; iShares FTSE/Xinhua 25 China Index, the main Chinese index fund, is up 124% from a year ago. Lots of investors made some nice gains, but is there a correction waiting to happen?

Last month, the US Stock market experienced a sharp decline from the negative sentiment surrounding the sub prime mortgage crisis, but Chinese stocks barely flinched.

Why? Unfortunately, the 2008 Beijing Olympics has been priced into most of the popular Chinese stocks and ETFs, reducing the overall return available on these equities.

In a previous post, I recommended 3 Chinese stocks to research during the Beijing Olympics quarter, however I know believe that investing in China is too popular now, which makes China an unfavorable investment territory. Maybe China will cool off after the Beijing Olympics, but places like India, Mexico, and other emerging nations look more attractive at the moment.

What do you think? Is China still an attractive investment considering the speculative frenzy surrounding the 2008 Olympics?

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