Short or Long China?

3/1 - "During 2006 and the first part of 2007, I had a significant amount invested in Chinese financial, industrial, and consumer discretionary shares. At that point, valuations became too rich for me and currently I only hold Guangshen Rail (GSH)...valuations on some Chinese stocks still appear to be unsustainably high."

"...slowing world growth and the decreased rate of demand will also impact the Chinese economy, just as rational expectations will impact the Chinese market. As the economies of the developed world slow, it is unrealistic to believe that the economies of Asia can totally decouple from the effects of that trend...Yet, as mentioned earlier, there has already been a large correction in the value of Chinese shares."

"At this juncture, it is too risky to forecast the general direction of the Chinese market...However, careful research should be able to isolate a few reasonably-priced companies that offer potential for significant appreciation...At the moment, I am watching China Life Insurance (LFC), China Petroleum and Chemical Corp. (SNP), and Xinyuan Real Estate (XIN), among others. Of the higher P/E shares, Focus Media (FMCN) is one of the few that have my interest."