Get the feeling we have been here before? Mainland firms taking big stakes in small Hong Kong manufacturing firms causing huge share price rises - the latest turn in the great China-concept boom seems all too familiar. In late 1992 through the first half of 1993 local second and third-line companies were the subject of backdoor listings by mainland firms wanting a Hong Kong toehold. Very often the targets were dormant shells with poor profit records. Many price spirals proved to be backed by nothing more than rumour. Yesterday toy manufacturer Kader Holdings and electronics maker and wine distributor Firstone Holdings saw their shares soar in response to mainland parties buying substantial stakes. A flood of similar deals seems inevitable given market sentiment, bountiful liquidity and, above all, fabulous profits for everyone involved. Whether mainland planners consciously thought out the China-play boom of last year the latest theme seems a natural extension of what went before. If history is a guide the faith placed in Chinese shareholders to bring fresh business and big profits may be overstated. Many shell companies bought by mainland firms four years ago later faded into obscurity. Red-chip conglomerates shifting their taste for asset acquisitions have followed a predictable pattern. First they bought assets from government bodies on the cheap, triggering spiralling share prices. New equity was raised at high earnings multiples allowing a virtuous circle of new purchases and earnings growth to follow. When you can raise money at 20-plus times earnings it is not difficult to maintain healthy earnings per share growth by purchasing stakes in small local firms. Quite simply there is less reason for red-chip parents to inject prime mainland assets cheaply with the objective of a high share price achieved. Having done the hard work getting there, the time seems right to go shopping and have some fun. For Hong Kong major shareholders of small listed companies the prospect of selling a business with few prospects could hardly be better. For directors of mainland firms with personal account stakes in target stocks there is incentive enough. Local regulators look set for more headaches with syndicates given easy scope to spread false rumours of mainland acquisitions. Caveat emptor clearly applies for investors buying into such companies. The China-concept boom has evidently gone beyond the scope of fundamental analysis. Most brokerage analysts admit to having given up normal measurements of value. Essentially, a conglomerate-building process has been unleashed that has become self-sustaining as share prices climb. Failing an external shock or clampdown from Beijing there seems little immediate threat to the machine. From a public policy perspective China is playing a very clever game. By creating vast conglomerates along the South Korean model, capital is raised, industrial restructuring follows and social aims of cross subsidising non-productive firms to minimise mass lay-offs is achieved. Further down the line investors will ask tough questions about management quality and earnings growth, but for now those high share prices show a glowing picture to the outside world. To date much of the money going into mainland-backed firms has been local. Ironically, the cocktail of high share prices, fresh equity issues and new acquisitions is attracting an entirely new class of investor. Suddenly, red chips look good to international funds investing purely on quantitative assessments of earnings upgrades. Despite last month's mainland regulations designed specifically to forbid backdoor listings, there seems little appetite within the China Securities and Regulatory Commission to clamp down. Understaffed and busy at home, it is questionable whether it is even fully aware of what is happening in Hong Kong. Looks like this boom could run a while yet.