Shenzhen express set to go but it's not for everyone

CHINA has not succeeded in deflating a massive home-made asset bubble, in spite of stock market turmoil early this year, a long-running shake-up of its property market and a tidal wave of capital outflows. That's why its recent decision to open up its stock markets is so imperative.

To illustrate the scale of the Chinese asset bubble, Hong Hao, who works for a Hong Kong unit of state-owned Bank of Communications, cites a figure: one-third of residential housing in Beijing carries a price tag of at least 10 million yuan (S$2 million). Then, there is the frothy valuation of China's domestically-listed A-shares: 15 times price-earnings ratio for those listed in Shanghai and more than 40 times in Shenzhen, compared with just 10 for stocks on Hong Kong's main board.

"Many things are more expensive in China than Hong Kong," observes Mr Hong, head of research of Bocom International Securities. "It's typical of an isolated market."