Chinese Stocks: Day of Reckoning Coming Soon?

China Mobile, the largest mobile phone manufacturer in China, saw its stock price plunge 11% yesterday. The stock was near its all-time high at the time and had more than doubled in less than a year. Was it a “normal” correction or are worse things yet to come?

Many investors fear a day of reckoning for the crazy Shanghai market. For some, it has moved up far too fast- with no fear of a sell-off. This Yahoo Message Board poster, mytechteacher, explained the dangers rationally:

It’s not China Mobile that will bring down China Mobile. Everyone is stating how it is such a great company, large china market, and so on. Look at the 1929 crash and depression. The crash was caused by our own government and many great stocks suffered.

I agree China Mobile is a great company. I purchased at $18 and $20 a few years ago. Unfortunity, I sold most of my shares(about 80%) at $101 last week. I decided to excute even thought it hurt me at the time, because this stock rose to quickly. My plans where to hold for many years.

Again, China is a great county and will thrive over the next decade. But if you step back for a minute, you would agree, double and triple digit increases (stocks and china index’s) in a year or two period of time is going to cause a major correction and possibly a crash.

It might be tomorrow or it might be in two years.

I lost a lot of money during the tech boom. Sold and got back in few weeks before the correction. I just want everyone to be carefully, don’t let greed get the best of you.

Will you know when to get out? Or will the greed dull your senses? (As it did to many investors during the tech bubble- as he so aptly points out.)

These 10% one day corrections are hard to swallow. But pullbacks are normal, even in bull markets. What will happen when the real BIG sell-off occurs in Chinese stocks? The race to the door will not be a pleasant one. Someone will be left holding the bag.