Investors in New York are so worried about the impending slowdown in China, they better than doubled the value of Youku.com (YOKU, news, msgs) on its first day of public trading.
Youku is billed as China's YouTube and, in common with that division of Google (GOOG, news, msgs), it doesn't make much -- or in its case, any -- money. Youku took in $35 million in the first nine months of this year but, a bit more impressively, spent $60 million. Even more impressively, it's now trading at 40 times projected annual sales.
And then there was this month's other Chinese rocket, E-Commerce China Dangdang (DANG, news, msgs), peddled as China's Amazon.com (AMZN, news, msgs). Except that a market that turns up its collective nose at U.S. mega-caps selling for 10 times earnings had no trouble paying more than 100 times earnings for Dangdang. Amazon fetches a comparatively pedestrian 39 times earnings.
Manhattan natives haven't been this excited since Peter Minuit supposedly spilled his beads.
Wall Street's trading tribe must have its reasons for the warm welcome, but it's not because the last lot have been so hot. After initial gains almost as heady as Youku's and Dangdang's, Chinese real-estate portal SouFun (SFUN, news, msgs) is down about 15% over the past month. Country Style Cooking Restaurant Chain (CCSC, news, msgs) topped out on Oct. 26 at twice the share price of its initial public offering and has since lost about one-fourth of its value.
So what's propelling Dangdang and Youku, besides comparisons to U.S. Internet success stories? Just one thing: growth. Dangdang's sales are up 56% year over year, and its market in terms of Chinese online spending is likely to boom for years to come. Youku's visitor count is up 53% from last year. The momentum crowd aims for home runs instead of singles. People are paying up to see what these companies might become a decade from now, in the hope that they've found the next Baidu (BIDU, news, msgs).
Contrast the promise of such crazy upside with what the world's least-popular securities now offer. That would, of course, be the sovereign bonds of the most economically wounded European states. Not only are their economies not growing, but they're also doomed to shrink if governments comply with the austerity conditions Germany and the rest of the European Union have set in exchange for their costly "aid."
To buy this debt alongside the European Central Bank you'd have to believe that Germany, which spent recent weeks enthusiastically saying "nein" to every proposal made by its needy allies, will suddenly and inexplicably capitulate and sacrifice its good credit on the altar of unity. There's a better chance of German Chancellor Angela Merkel doing a flamenco with Ireland's prime minister, Brian Cowen.
