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Comment on Muddy Waters and Sino-ForestI've been hiking in Cinque Terra, Italy, when I got on-line to find myself barraged with questions from investors about this week's market activity on Sino-Forest. More later, but just briefly:
For investors, remember the eras of $10/Bbl crude, $300/oz gold, the dot-bomb crash, the Global Financial Crisis? Well, investment in China's economy is going through its own crisis now: not a lack of demand for energy or precious metals, or the true value of the internet, or in finanical liquidity, but a crisis of confidence, in transparency, audits, and underlying values. But the Chinese economy is not going to tank . Certainly, be selective. Don't pick any company with China in its name. But discarding all opportunities to profit from investment within what will become the world's largest economy doesn't make sense.
For companies with Chinese assets listed in North America, see the above. Companies that abandoned their path as investor sentiment turned negative ultimately 'bought high and sold low.' Lessons are there to be learned, certainly, but ultimately the factors that made investments in China attractive two years ago still exist.
posted...June 10, 2011