Shades of irrational exuberance

Over the weekend Shang Fulin, the head of China's Securities Regulatory Commission, declared that mainland stock exchanges were on shaky foundations, and that healthy performance wasn't assured. At the same time, some top analysts have advised investors to be wary of high-priced Chinese stocks. So how did the markets respond? They soared to record highs Monday in Shanghai, Shenzhen and Hong Kong.

Last year ended gloriously for China's stock markets. Hong Kong became a dominant player in initial public offerings, and saw intense interest from investors hoping to cash in on China's economic strength and the rising value of the yuan. Mainland bourses were also aided by the freeing up of non-tradable state-held shares. There's been a lot of talk about some sort of bubble forming here, including one Chinese official warning against "blind optimism."

That's a pretty good synonym for "irrational exuberance." Of course, Alan Greenspan spoke those famous words in late 1996, nearly four years before the tech bubble burst. With so much money being made, the party could last for a while.