Unwise as it is I have studiously avoided understanding the arcana of Money. But noting that the ca. 50% growth in the Chinese stock market is universally regarded as dangerously overheated, how can these cited returns be found reasonable and healthy; and don’t those returns signify capital flight from the economies receiving investment? How can that possibly be healthy for them?
No doubt my questions reflect nothing but my ignorance; If you would condescend (I choose that verb in judgment on myself, and out of respect for your mastery) to enlighten me I would be grateful.
Thanks.

I frankly don't follow the muddle above.

But presuming I understand what you are trying to say:
(i) Returns in MENA markets were coming off of very low levels, and initially justifiable given low valuations for some equities. Overall, well, that's a harder call. There has certainly been clear signs of overheating - domestically driven - in pricing. In 04-05 I thought there were deals. Now, at price-earning ratios in the 20s plus for cheaper equities.... well I don't have the same opinion. Partially this is due to too little investing opportunities.
(ii) Capital flight? From where? The comment makes no sense. Economies receiving investment are by definition attracting capital. Productive investment is a good thing, in general. One can of course properly worry about speculative hot money bidding up asset prices, a la Asian in the early 90s.

The other issue I wonder about - and yes, I would very much like a Lounsbury opinion on my ignorant musings here - is the lack of sophistication in instruments and strategies available on the Gulf financial exchanges. Long-only, no derivatives, no apparent appetite to do anything but buy and wait for your 25% bare minimum returns. Returns which the market in the run to $100 oil has generally provided. But what happens when the oil price goes to say $60 and sits there for 2 years and there's no way for an investor to hedge with some puts, or even if they bail out they then have nowhere else to put the remainder of their capital or at least their capital sits there stagnant with no return (as if it wasn't bad enough already taking huge inflation haircuts). What do these markets do in such a scenario? Do they just sell off 75% and stagnate until the oil price is up again? Or does greater use of derivatives provide new opportunities and spread plays?

I am not sure I see the question.

With few exceptions, equity investing culture is brand new, one can say evening only emerging in the past ten years. Since you cite oil, I presume you're thinking of the Gulf markets.

It would be extraordinary to see financial practice immediately be of the same development as say NY or London.

The markets, if they are oil driven will crash - simple enough. Just like old time markets. Sit and wait to come back.

I don't see derivatives becoming used for another generation - ex outsiders using.

For non-Gulf markets, I might have other answers but lazy at the moment.