In late 1993, I was in the center of the financial universe…

At that time, Hong Kong stocks were up over 400% over the previous four and a half years. And I was a broker specializing in international stocks and bonds.

It was insane… All our customers wanted were China plays – and the way to get China plays back then was through Hong Kong.

China-stock frenzies get as crazy as any mania in the financial world…

[ad#Google Adsense 336×280-IA]The last China-stock frenzy was from mid-2005 to late 2007. China’s benchmark stock index, the Shanghai Composite, soared from a low near 1,000 to a peak near 6,100.

When the next China-stock boom comes, you want to be on board. And you want to stay on board as the stocks go to heights beyond all reason. China booms almost always go farther than anyone can imagine.

Of course, stock market busts in China are as crazy as the booms…

From its peak to its 2003 bottom, the MSCI China stock index lost over 90% of its value. Since 2000, the Shanghai Composite has had two 50% busts. And right now, it’s all the way down to 2,500, from its high of 6,100.

Nobody wants anything to do with China.

The thing is, Chinese stocks are near record-cheap…

Looking at Chinese stock prices relative to their earnings (the price-to-earnings ratio), the Shanghai Composite is almost as cheap as it’s ever been. Based on analyst estimates for next year, Chinese stocks are trading at a single-digit P/E ratio.

We’ve never seen a single-digit P/E ratio before on this index. And these stocks are close to record-cheap based on price-to-book value as well.

Look, we have plenty of reasons to be negative about Chinese stocks. And many of the reasons are not your run-of-the-mill reasons… For example, several downright frauds have popped up in billion-dollar Chinese stocks. This is scary stuff.

With all these frauds, I’m reluctant to invest… but so is everyone else. Because of this, Chinese stocks are now hated. They’re also cheap. So based on our DailyWealth investment criteria, all we’re missing is the uptrend.

I’ve lived and worked through a few China-stock booms. I know from experience, they get nuts. I know you can make a lot of money. China-related stocks soar beyond all reason in a China-stock frenzy. And Chinese stocks will return triple digits again – sooner than later.

So I don’t want to miss the next big China-stock frenzy.

When the uptrend returns, I will be a buyer.

I might get stopped out once or twice trying to catch the start of the new uptrend. That’s fine with me – it will be a small price to pay for the potential triple-digit gains I’ve experienced more than once.

But I’m not buying yet. And I have no “action to take” for you today… I’m just alerting you that Chinese stocks are cheap and hated right now… and we are looking to buy when the uptrend arrives.

Based on the incredible gains of previous China bull markets, you should consider hitching a ride when the time comes.

I’ll let you know here in DailyWealth.

Good investing,

— Steve Sjuggerud

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Source:  Daily Wealth