Very interesting article. Emerging Stock Markets Face the $1 Trillion Curse: David Wilson By David Wilson Jan. 11 (Bloomberg) -- Will $1 trillion become a curse for the four-year rally in emerging-market stocks, as it was for the Internet bubble of the 1990s? The question arises because the value of China's stock market exceeded this threshold yesterday and Russia's did so last month, according to data compiled by Bloomberg. Before then, no emerging market had ever been so large. Cisco Systems Inc., the world's largest maker of computer- networking equipment, looked like it might become the first $1 trillion company by market value in February 2000. At least it did to Paul Weinstein, then an analyst at Credit Suisse First Boston, who wrote about the possibility. Within two months, Cisco's shares reached their peak and the bubble started to burst. The stock plunged 90 percent from its all-time high and the Nasdaq Composite Index fell 78 percent from its record by October 2002. Emerging markets have surged almost as much as the Nasdaq did in its heyday. Morgan Stanley Capital International's Emerging Markets Index rose 312 percent in the last four years -- eight percentage points less than the U.S. index's 1995-1999 rally. Chinese and Russian stocks are largely responsible for the gains. Eight of the 40 most heavily weighted companies in MSCI's index are based in China. The total is the largest among the 25 countries represented. Russia has four, including OAO Gazprom, whose 4.5 percent weight is the highest among its 851 members. Local Similarities The parallels between the two countries go further. Both have energy producers among the 10 most-valuable companies worldwide. Gazprom, the world's biggest natural-gas provider, is fifth. PetroChina Co. is ninth, higher than every other oil company except Exxon Mobil Corp., No. 1 overall. Both had initial public offerings last year that were among the 10 largest ever. Industrial & Commercial Bank of China Ltd. raised $22 billion, a record. Bank of China Ltd. made an $11.2 billion IPO. Russia's OAO Rosneft had a $10.6 billion sale. Both restrict foreign investment, leading to what might be called second homes for stock trading. China's is in Hong Kong and Russia's is in London. For both, the $1 trillion market value figure is far higher than the amount of stock available for trading, or float. Just 27 percent of ICBC's shares trade, for instance. The rest are government-owned. Russia has a majority stake in Gazprom. Groups of Four And both are joined with Brazil and India in what Goldman, Sachs & Co. called the BRIC countries. All four may rank among the world's six-largest economies by 2050, in the firm's view. The grouping recalls the status of four Internet-related companies during the bubble: Amazon.com Inc., the largest online retailer; Cisco; EBay Inc., the biggest Internet auctioneer, and Yahoo! Inc., owner of the most-visited U.S. Web site. Cisco's stock wasn't the only one to crash after the bubble ended. Amazon.com tumbled as much as 95 percent from its record, EBay retreated 79 percent and Yahoo skidded 97 percent. Investors in emerging-market stocks certainly may avoid this kind of collapse. But after seeing how far and how fast those shares have soared, the $1 trillion numbers look scary.