The more I look at shares of Chinese companies traded in the U.S.,the more I get the feeling that I’m being transported back to 1998. Theprice appreciation in Chinese stocks over the last two months hassimply been unbelievable, with the Shanghai ETF (FXI) up 63 percentsince mid-August. But with many of the big cap Chinese stocks beginningto reach very frothy valuations, many investors are left wonderingwhether they’ve missed the party in Chinese shares.

My answer is a qualified no. I’m certainly not advocating thatinvestors run out and buy anything based in China, but I do believethat we’re still in the middle stages of the move in Chinese shares,and there are still huge gains to be had by selectively trading Chineseshares. Having surveyed the market for Chinese shares, I am wary of thestocks with bigger market caps, as I believe these stocks have all thedownside should China fall, but they’ve already moved so far up thatthe upside is significantly ...

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