But is it irrational?

Alan Greenspan has added his weight to those who are warning about the Chinese stock market. Bloomberg reports:

Former Federal Reserve Chairman Alan Greenspan said he was concerned Chinese stocks might undergo a "dramatic contraction" after its main stock index jumped more than 90 percent this year...

"It is clearly unsustainable," Greenspan told a conference in Madrid today by satellite. "There is going to be a dramatic contraction at some point."

Apparently, he did not say there is irrational exuberance, though.

Greenspan is sanguine about the rest of the global financial system.

Greenspan today said the global financial system remains resilient. "I am not worried about the system overall, but I am worried about some parts," he said. "I am concerned for example about China."

Others are possibly less sanguine. From another Bloomberg report:

Asia's economies, in "much better shape" since a region-wide financial crisis struck a decade ago, still aren't sheltered from the threat of a global slowdown and capital outflows, according to Lehman Brothers Inc.

Weaker U.S. growth spreading to Europe and Japan is one of the risks facing Asia's export-reliant markets, which are twice as dependent on sales abroad as the rest of the world, Lehman economists led by Robert Subbaraman said in a May 18 report.

Japan's trade data for April highlight that risk.

Exports grew 8.3 percent, cooling from 10.3 percent in March, the Ministry of Finance said in a report today in Tokyo. Shipments to the U.S. fell 4.8 percent, the steepest decline since May 2004.

The trade surplus rose 51.8 percent to 926.7 billion yen ($7.6 billion). The median estimate of 37 economists surveyed by Bloomberg News was for the surplus to widen to 953.7 billion yen. Imports climbed 3.5 percent from 0.1 percent in March.

According to the Lehman report, China's stock market adds to the risk.

A crash in China's stock market may make investors more wary of speculative bets on assets, sparking a flight in such funds, the report said. Emerging markets in Asia received net private capital flows of $197.3 billion last year, the ADB said in March.

If so, the large but much-maligned foreign exchange reserves would come in handy.

Still, Asia's record holdings of foreign-exchange reserves since the crisis will enable central banks to defend their currencies should capital flight occur, Lehman said.

And then there is the interest rate cut.

With inflation "well under control," central banks have room to cut interest rates should risks to growth emerge, Lehman said. Asian policy makers raised rates more than 25 times last year to curb inflation, control lending and stem money from overseas that were creating asset bubbles in their markets.

Here, Thailand showed the way yesterday.

Thailand's central bank cut its benchmark interest rate for a fourth time this year to revive spending by consumers and businesses whose confidence is near a five-year low.

The Bank of Thailand lowered its one-day bond repurchase rate to 3.5 percent from 4 percent. The decision was expected by 12 of 16 economists surveyed by Bloomberg News.