In the 1980s, the shares of many Japanese manufacturing enterprises were trading at hundreds of times their prospective earnings, while the average PE (price earnings) ratios in other major markets were not much higher than around 15.

It was considered normal at that time for Japanese investors to place crazy premiums on the shares of companies they believed were investing their revenues on building new businesses and conquering new markets. That notion fell out of favor soon after the Japanese economic bubble burst and the collapse of asset values.

Despite the introduction of numerous innovative investment metrics in recent years, traditional thinking has prevailed in many highly internalized markets, particularly Hong Kong. When Cathay Pacific, the city's flag carrier, was facing earnings headwinds, it went back to the basic strategy taught in business schools - cost cutting.

Indeed, even mighty HSBC had to greatly reduce its operating expenses, including shutting down branches, trimming staff and selling assets, to win back investors' confidence.

But, some stock analysts are beginning to challenge the conservatism of Hong Kong investors who, they said, may have missed the opportunities open to them by the new economy that's dominated by technology companies, including those that have become new darlings to many Chinese mainland investors.

Investors need to wean themselves from their fixation on earnings to evaluate, or appreciate, the potential of these new age companies that are striving to become the Amazon or Facebook of Asia.

Amazon is not making a lot of money compared with, say, Walmart, its major rival in retailing. And yet, its share price surged to a record high of $1,017 apiece last week, valuing the online retailer among the top 10 enterprises in the United States in terms of market capitalization.

A few investment analysts in the US have questioned the sustainability of this tech craze, raising the specter of another bursting of the tech bubble that can be many times the size of the dot-com boom that went kaput in 2000.

In Hong Kong, the stock exchange is pushing for a new board to trade in tech companies that have little, or no, earnings track record. Seeing the bloodbath taking place in the Growth Enterprise Market, there's little wonder that few people outside the stock exchange are getting too excited about another new board.

(HK Edition 07/07/2017 page10)