As investors painfully know, stock market bubbles can be absolute killers. Just ask anyone who was sucked into the last one, the dot-com craze at the turn of the century. That sparked a bloodbath, the resultant dot-com crash from March 2000 to October 2002, a period in which the Nasdaq was smashed for a wicked 78% loss.

To some pros who monitor the emerging markets, another bubble is rapidly developing in China, the world’s fastest expanding economy, where 2007 GDP growth is pegged between 9% and 10%.

Noted celebrity global money manager, Jim Rogers, is one of those worrywarts. What bugs him, he says, is that “the Chinese government is worried” about the bubble, “but it’s very slow-moving.”

Another worry-wart, the international liquidity tracker, Charles Biderman, takes the dilemma one step further on a more ominous note. “Not only do we already have a bubble in the emerging markets, especially China, but it’s growing,” he said.

By emerging markets, he’s chiefly referring to Brazil, Russia, India, and China, which are widely referred to on Wall Street as BRIC.

Noting that American investors have pumped about $300 billion into emerging markets since the start of 2005 — versus purchases of less than $50 billion of American stock mutual funds in the same period — he argues that this investment craze has clearly gotten way out of hand.

Mr. Biderman, president of TrimTabs Investment Research of Santa Rosa, Calif., a liquidity service for institutional investors, primarily hedge funds, says the last time so much money went into one sector was in 1999 and 2000 when about $300 billion poured into Internet stocks just before the dot-com crash.

In effect, he sees the imminence of part 2 of the China syndrome. Part 1 was the surge in Chinese stocks. The next phase, part 2, will be the blow off.

Mr. Biderman expects the latest Chinese craze to culminate in a brutal decline in the emerging markets which should kick off in the next few months. Overall, he expects these markets to tumble between a hefty 25% and 33% over the next three to six months.

Last year, Chinese stocks exploded on the upside. For example, the iShares FTSE/Xinhua China 25 index, an exchange-traded fund that invests in the largest and most liquid Chinese companies, soared 83.2% in 2006, until backing off this January and falling 6.5%. In addition, the average Chinese mutual fund shot up 62.8% last year, compared with a 15.8% total return for the S &P 500.

Mr. Biderman is urging clients to waste no time and to take profits in these markets immediately. “I would sell at least 75% of such holdings now,” he said. “Investors may miss some of the gains, but it’s certainly a lot better to be safe than sorry.”

Adding to the risks, he said, is that margin debt in America (buying stocks on partial credit) is at record levels, surging $50 billion last year, with most of it utilized in emerging markets. So any decline in these markets, he warns, could spark an avalanche of selling. On top of this, the floating stock supply in these markets continues to escalate, with $3 billion of new offerings scheduled in China and Hong Kong in the next month, following the issuance of $2 billion last month.

A key question: How would a substantial sell-off in the emerging markets affect the American market?

There will be collateral damage, but it’ll be short-lived, Mr. Biderman believes. Why so brief? Because, he explains, China is not worthless, as was the case with a lot of Internet stocks in the late 1990s; the Chinese companies have substance and staying power and are not going to go down 90% as many Internet shares did.

The London-based money manager, Raymond Stahler of Stahler, Dearborn Ltd., sees it differently. Considering the many lofty valuations and huge gains, a big drop in the emerging markets is only a matter of time, he believes.

“Being the investment stars they are, any big sell-off in these markets, which have broad exposure in America, would surely psychologically damage the American market, as well,” he said. “How badly? Who knows? But it won’t be pretty, something tantamount, I believe, to introducing American investors to what Chinese torture is all about.”

Standard & Poor’s chief technical strategist, Mark Arbeter, also flashes an SOS, arguing that the Chinese markets are likely to undergo a major correction from their dizzying heights.

Taking note of the price chart of the iShares FTSE/Xinhau China fund, Mr. Arbeter observes it has gone parabolic, while trading volume has exploded. It suggests, he said, the fund has been subject to “mass speculation.” The volume, he warns, “is very typical of a speculative blow off that many times ends very badly.”

dandordan@aol.com