The Chinese stock market is unquestionably the hottest market this year. While most other markets suffered from the credit squeeze originating from the U.S. subprime mortgage mess, the Shanghai CSI 300 index shoot up roughly 2500 points, doubling the indicator.

Many economists and analysts, based on the hefty evaluations of the Shanghai market, believe a correction is ahead – and soon. Stocks on the CSI 300 index sell for an average 44 times of earnings, compared with 26 times for H shares in Hong Kong, according to Bloomberg.

While no one can predict the market, a little history helps the analysis. The longest and strongest bull run in New York Stock Exchange was the 1990s. During that ten years, the Dow Jones Industrial Average Index rose from roughly 2700 to 11700, a 333% increase. For Tokyo Stock Exchange, the Nikki index increased from roughly 6600 to 23700, an increase of 259% from 1980 to 1990 – the most spectacular growth in the market’s 129-year history.

The CSI 300 Index in Shanghai, in comparison, witnessed a growth of 485% in less than two years. It jumped from 940 in 2006 to 5,500. It is the most dramatic bull run the world has ever seen. If the Shanghai market keeps the current growth speed, the market index would jump 685100% to
6,441,546 in 10 years. Clearly, it is impossible.

So, does that mean an dreadful market crash is looming soon? If history is any guide, the New York and Tokyo bull run both ended with spectacular crashes.