China Stock Party Won't Last

Editor's note: This column was submitted by Stockpickr member Faisal Laljee, author of StocksandBlogs.com.

I hate to be a party pooper, but the Shanghai Stock Exchange and the excitement surrounding all the recent China stock IPOs reminds me of the Nasdaq exuberance of 2000.

Granted, China is growing at a 10% pace, but does that justify the 80 multiple currently sported by the Shanghai Stock Exchange, especially when compared to the meager 16 multiple of the S&P 500? We may be seeing hints today of a more rational market to come -- check out Bubble Fears Circle Chinese Tech Stocks from this morning.

It seems as though every day, all day, I see new tickers scroll across my TV screen representing new companies I've never heard of: China Digital TV(STV Quote - Cramer on STV - Stock Picks), China Natural Resources(CHNR Quote - Cramer on CHNR - Stock Picks), China Finance Online(JRJC Quote - Cramer on JRJC - Stock Picks) ... the list goes on. Many have no history of earnings.

The Chinese market is up 110% so far this year and more than 200% since January 2006.

Even stocks like China Mobile(CHL Quote - Cramer on CHL - Stock Picks), China Telecom(CHA Quote - Cramer on CHA - Stock Picks), China Life(LFC Quote - Cramer on LFC - Stock Picks) and Baidu(BIDU Quote - Cramer on BIDU - Stock Picks), stocks that actually have an earnings history and have some claim to investor confidence are up like the Ciscos (CSCO Quote - Cramer on CSCO - Stock Picks) and Aribas (ARBA Quote - Cramer on ARBA - Stock Picks) of the tech bubble.

I don't know when the party will end, but it will definitely end unless we see a near-term, decent-sized correction. And when it ends, I would hate to be holding anything that starts with the word China.

My recommendation: If you are a gambler, keep betting on China until one day you lose a lot of money. Otherwise, reduce your exposure to China (note I say "reduce" because I don't know when a top will come -- nobody does).

Go long Russia(RSX Quote - Cramer on RSX - Stock Picks), India(IFN Quote - Cramer on IFN - Stock Picks), South Africa(EZA Quote - Cramer on EZA - Stock Picks), France and even Indonesia.

Alternatively, you can pick up select names in Latin America, Europe, Turkey and Brazil. There are plenty of ways to make 30% to 40% returns a year without the risk of losing your shirt.