Chinese stocks listed on American exchanges are down for the year 2008, tracking Wall Street sentiment relatively closely. CAI, CYI and CQI are market cap weighted indices and as such are tracking large cap companies very closely. China telecom sector got caught on fire in the afternoon on news of a possible industry revamp and its implications. CHU, China's smaller mobile carrier is expected to benefir from the industry reshuffle. China Unicom rose 2.2% to $22.78.

Current market conditions give us a great deal of concern, especially for shorter term investors. We don’t know all the answers but will reflect on current situation and formulate a defensive strategy. All three major U.S. stock indexes plunged more than 2 percent on Tuesday after a record loss at Citigroup and the worst showing for retailers in five years fuelled fears that the economy was heading into recession. JP Morgan missed earnings estimates, just as Intel did. No wonder, Chinese ADR tanked alongside. One may ask: where is the bottom? Honestly, we don’t know. But this is what we know:

Can’t help but to start with a quote from the previous Newsletter, saying “Based on our cautious but still bullish outlook for the U.S. markets, coupled with our strong outlook for the China stock universe, we think October can potentially be another great month for China ADR investors”. And indeed, October turned out to be another great month—only for the smart investor! Chinavestor picked stock of the month, China Life Insurance (LFC), is trading above $100 vs. $88 at the beginning of the month. Plus Growth and Conservative Portfolios (Update on Page5) are ahead 13.8% and 11.0% , respectively.