The Buying Opportunity You Won't Want to Miss

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It didn't happen exactly as I predicted, but it's finally happened. And it means that the world's fastest-growing stocks are available for cheap.

Before I get to the whos, whys, and wheres, though, let me tell you who we have to thank.

Here comes the cabal
Although owners of heavily shorted stocks such as Ford (NYSE: F) and Qwest (NYSE: Q) may disagree with me, short sellers are crucial to healthy markets.

By making the case for stocks to fall, short sellers make the market more efficient. Shorts temper excessive optimism, helping us all avoid the protracted painful corrections that are its consequence.

Where shorts didn't tread
Optimism, however, had been the defining characteristic of Chinese markets until this year. Chinese stocks gained 130% in 2006, and another 97% in 2007. As a result, money has moved into the Chinese markets at a remarkable clip, and stories abound about Chinese housewives, cab drivers, and fishmongers speculating in the market.

Of course, there's also been nothing to stop them.

See, you can't short stocks in China. Without investors scouring the market for weaknesses, those same housewives, cab drivers, and fishmongers have been treated to nothing but good news. That made them overconfident, overzealous, and now overexposed to an unquestionably richly-valued basket of stocks.

It won't be that way for long ...
And China's Security Regulatory Commission -- fearing a stock market crash -- was reluctant to stop them. That's why the country held off for so long on allowing investors to short stocks.

But it's gotten so bad in China that the CSRC finally approved shorting at the end of September. What this indicates to me is that they believe all optimism has been purged from the marketplace. When that happens, we've reached the point of maximum pessimism -- the precise time that master international investor Sir John Templeton would have told you to invest.

And you should consider that. Because China bellwethers such as China Mobile (NYSE: CHL), Baidu.com (Nasdaq: BIDU), and PetroChina (NYSE: PTR) are available for lower multiples than we've seen in years.

Get ready to buy
That's why you should be licking your chops.

China's rapid economic growth will be the global economic story of the next 10 to 20 years. The opportunities are huge, and the country is growing richer by the day. In fact, our Motley Fool Global Gains international investing team recently returned from a research trip to China, where we were almost universally impressed by the companies we met with and the growth trajectories they displayed.

That does not mean, however, that we'd be willing to pay any price to own them. Today, however, thanks to the decline in the Chinese market, we're looking hard at a long list of Chinese stocks. To see what we're recommending, click here to try Global Gains free for 30 days. There is no obligation to subscribe.

This article was first published on August 20, 2007 as "The Buying Opportunity You Won't Want to Miss." It has been updated.

Tim Hanson does not own shares of any company mentioned. Baidu.com is a Motley Fool Rule Breakers recommendation. The Fool's disclosure policy believes Yi Jianlian is going to be shocked to discover the New Jersey ain't that much better than Wisconsin.