<P><FONT size=4>ML 美林-中国的虚拟股票泡沫 05.23 </FONT></P>
<P><FONT size=4>China's Virtual Stock Bubble 4页</FONT></P>
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<P><FONT size=4>Bubble Risks?<BR>&#1048708; Once again, China (2007) is not Japan (late 1980s).<BR>&#1048708; Big difference #1: the PBoC is tightening much earlier than the BoJ did.<BR>&#1048708; Big difference #2: China’s stock market “bubble”—if it is one—is virtual.<BR>Unlike late-1980s Japan, it has had very little impact on the real economy.<BR>&#1048708; So a correction would have at most a temporary economic impact on China,<BR>and thus the rest of Asia in our view.<BR>&#1048708; We think the bigger market risks lie on the upside. First, RMB appreciation<BR>could exceed expectations. Second, the bubble could cross the border to<BR>Hong Kong, as China opens the door to capital outflows into risky assets.</FONT></P>