Asian stock markets hit record highs

It was another record breaking performance for some of the Asian stock markets today. Bloomberg reports:

Asian stocks rose to the highest in three weeks as benchmarks in Hong Kong, China, Australia and Singapore closed at all-time highs.

BHP Billiton and Nippon Mining Holdings climbed as prices of metals and oil rebounded. Samsung Electronics Co., Asia's biggest maker of mobile phones and flat screens, and Westfield Group, the largest operator of U.S. shopping malls, gained after U.S. consumer confidence rose to the highest since 2004, adding to speculation sales in the region's largest export market will grow.

Is it a sign of irrational exuberance? Or just blind optimism? Especially in China?

China's stock market has become the most expensive in Asia, leading strategists at Citigroup Inc., HSBC Holdings Plc and UBS AG to warn investors to stay away.

Shares traded on mainland Chinese exchanges cost twice as much relative to earnings as they did 18 months ago, and double the average for emerging markets, after extending last year's 121 percent rally in the Shanghai and Shenzhen 300 Index. The surge sent their value above $1 trillion for the first time and prompted the government to caution shareholders that "blind optimism" is driving gains...

The Shanghai and Shenzhen 300, tracking A shares on the mainland's two exchanges, jumped 10 percent last week to 2396.09, its biggest weekly gain in eight months. The index climbed 4 percent today and is up 22 percent this year...

The Shanghai and Shenzhen 300 is valued at 37 times profit, up from a low of 14.4 times in July 2005, and the H-share index at 20 times. The Morgan Stanley Capital International Emerging Markets Index, a global benchmark, is valued at 15 times...

Cheng Siwei, vice chairman of the Standing Committee of the National People's Congress, the Communist Party-controlled parliament, warned investors against "blind optimism" in local capital markets that are relatively underdeveloped, the state- owned China Securities Journal reported Dec. 30.

China's policy makers are trying to stem the boom. Banks were urged to stop lending money for stock investments and to recall outstanding loans, the China Banking Regulatory Commission said in a Dec. 31 document sent to the lenders and obtained by Bloomberg News.

Foreign buying is a major factor in most Asian markets. That may not be a good sign, as foreign investors are often late to the party.

And things could turn bad quickly if authorities in Asia start getting serious about stemming the "massive" capital inflows, as suggested by this Bloomberg report.