Let me lay out some trading strategies for the day ahead. Baidu,com (NYSE:BIDU) is my first choice - a stock that is liquid, volatile and has sound fundamentals. This is the stock one can make quick profit - or loss - depending on how you execute trades. The stock is volatile compared to Chinese ADRs measured by the "FXI" - see chart here

Steep losses right at the open. The DJIA is down 242 points in the first 15 minutes of trading. Europe and Asia was not any better either. Hong Kong's Hang Seng closed below the 17,000 level not seen since 2006. These losses are attributed to the plunge in the Dow on Friday. So it looks as if the downward spiral has started.

It seems it is not a good time to talk about Chinese mobile operation industry as people are anxiously waiting for the revised US bail-out plan, and global share markets tumbled in the anxiety. However, as a mater of fact, the credit crunch and liquidity squeeze caused by subprime mortgage crisis have limited impact on Chinese economy.

Given the tremendous impact of the “bail out” plan on American stock markets, this Newsletter is non-traditional in a sense that it will give investors guidance for the upcoming days versus a month. To put latest developments into perspective ...

A new restructuring scheme of telecommunications was announced on 23rd May 2008. As the proposal says, the basic telecom service of Chinasatcom is incorporated into CHA and the latter one purchases CHU’s CDMA (including capital and business) by RMB 110 billion; CHU mergers with CN by stock - 1 CN share by 1.508 CHU share and 1 CN ADR by 3.016 CHU ADR; CHL consolidates with Chinatietong. Briefly speaking, the number of telecommunications service providers in China will be reduced from six to just three and only CHL, CHA and CHU exist.

Wall Street continued yesterday's rally by adding another 400+ points before 10:00 A.M. on Friday. Strong market sentiment carried over to Chinese ADRs, too. Stocks that were hit the hardest came back real strong this morning. CNOOC Ltd. (CEO), China's top off-shore oil producer, is up $12.73 followed closely by Sinopec (SNP) and Petrochina (PTR). Another huge company, China Mobile (CHL) is strong and is up $4.90 in the first few minutes of trading. Europe's largest bank, HSBC Plc (HBC) is up $4.78 or 6.01%.

Chinese companies listed in American exchanges plunged on Wednesday tracking the DJIA down. As the following chart reveals, the wide China ADR Index (CAI) lost 44.3% year-to-date (YTD) thanks to the free fall of large cap Chinese companies.

While the DJIA rallied on oil, GDP and jobs data, index for Chinese companies listed on American exchanges fell, fell hard. The China ADR Index (CAI) is a market cap weighted index and as such large cap Chinese stocks listed on the NYSE have a substantial impact on it. The index fell 16.54 points today and is down 28.92% year-to-date (YTD). This is in sharp contrast to NASDAQ listed Chinese ADRs measured by the China Nasdaq Index (CQI). The index is up today thanks to the larger Chinese ADRs of Ctrip.com (CTRP) and Baidu.com (BIDU).

China Netcom Group (NYSE:CN), China's smaller fixed line carrier, announced interim results for the first six months of 2008. This is the last time the company reports on its won without China Unicom (NYSE:CHU). CHU will acquire CN's fixed network and integrate it together with current GSM network. CHU's smaller and less dynamic CDMA network will be sold to China Telecom (NYSE:CHA), completing the largest telecom industry restructuring the world has seen yet.

Proposed merger of China Unicom Limited (CHU) and China Netcom group Corp. (Hong Kong) Ltd. by way of a scheme of arrangement of CN under section 166 of the Hong Kong companies ordinance
Notice of court meeting
Notice of extraordinary general meeting
Proxy Forms

China Unicom (CHU) and China Netcom (CN) submitted a document of proposed merger of the two to the Hong Kong Stock Exchange today. According to the document, last day of trading for China Netcom ADRs will be October 6, 2008 followed by a complete withdrawal of CN ADRs from the NYSE listing as of October 15, 2008. China Netcom as we know it will cease to exist while China Unicom will get a new name. The document lays out a clear timetable of events. What's not in the document but is very important is this: CN's fixed network with 109 million strong subscriber base will get a mobile phone arm - CHU's GSM network. This is the better one of CHU not just by subscriber numbers but by dynamics, too. While CHU's GSM network boosts 125 million subscribers and is growing at a rate of 1.1 million a month, CHU's CDMA network - soon to join China Telecom - counts only 43 million subscribers with a growth rate of 0.4 million a month.

Trading today showed again how much large cap companies matter. China Mobile (CHL), the largest cell phone carrier of the world by subscribers, weighted on the overall index. Shares of CHL lost $1.01 or 1.16% on expectations that it's going to be China Unicom (CHU) and China Netcom (CN) that will benefit from the telecom industry restructuring, while CHL will lose steam on the long run.

Chinese ADRs are caught in the wind along the DJIA and have gained significant momentum in the last three trading days. Number of Chinese ADRs trading above 50 day-moving-averages or DMAs increased from alst week to 13 with two of them reaching the "overbought" status, more than last week. Four ADRs are classified as oversold, less than last week. Overall, it's a pretty strong showing for the China plays.

There is not much direction to find for U.S. listed Chinese ADRs in Asian trading this morning. Trading in Hong Kong was extremely weak - in fact turnover in Hong Kong recorded the lowest volume this year. Shanghai is obsessed with another mega IPO, this time China Southern Locomotive is going public, raising concerns that already slim liquidity might dry up. This is the time when technical indicators are extremely useful. One of them is the so called Overbought / Oversold indicator, or simply OBOS. This tool looks into stock trading characteristics and determines if a stock went up too much too fast - thus is susceptible for a pull back or just the opposite. The following picture is a screenshot of Chinavestor's OBOS indicator posted for Premium Subscribers before the opening bell. Based on the indicator, three stocks look interesting for daytraders today: NetEase (NTES), China Unicom (CHU) and Baidu,com (BIDU).

Chinavestor.com, an independent stock research firm specializing on Chinese ADRs or China companies listed on U.S. stock exchanges, is proud to serve the wider investment community by making previous Newsletters public. Current topic of August 2008 Newsletter is: "Earnings season is on. Let's go stock specific." It is available for subscribers only and will be made public in September. July 2008 Newsletter is about explaining why U.S. equity markets have such a profound impact on the performance of Chinese stocks listed in Hong Kong (H-shares) and in New York (ADRs). We believe it still carries a lot of useful and relevant information applicable to today's market environment.

Chinese ADRs have accumulated substantial momentum lately. We like to use different technical indicators to gauge the market and pick up stocks that offer trading opportunities. One of these indicators we use is daily moving averages or DMAs. A stock has to satisfy the following criteria to catch our attention: Current price has to be above 50 DMA - first column under Technical section Current price has to be above 200 DMA- second column under Technical section 10 DMA has to above 30 DMA- third column under Technical section Additionally we like when 50 DMA and 200 DMA curves are positive or show an increasing pattern.

As the following screenshot of the Chinese ADR universe testifies, stocks that are interesting from a technical point of view are BIDU, CHU and SNP on the upside and Sohu on the downside. Baidu.com (BIDU) is on fire since releasing 2008 Q2 earnings last week. The stock slowed down today, gaining only $2.12 or 0.61% today - just in line with Google's trading pattern today. (see chart here). Based on stock characteristic calculations, theoretical high of $394 is not too far for Baidu.

Chinese ADRs are trading mixed today with Baidu.com (BIDU) taking the lead and Sohu.com (SOHU) taking a beating. Easing oil prices helped spur the DJIA to 11,315.00 points by 1:00 P.M. Lowering demand for the black gold became obvious today when statistics showed that U.S. drivers drove 3.5% less miles than last year, the biggest ever drop for the measure during the busy summer holiday season. Customs data showed that demand for oil dropped by 891,000 barrels in June vs. May, a sign that high price of oil is unsustainable. Many expect crude to come back to the $100 level within reasonable time. The greenback strengthened against both the Euro and the yen, adding fuel for the slide in the oil price. Looking at the U.S. listed Chinese stock universe, Baidu.com is shining the brightest today so far. China's premium search engine company is up $4.06 or 1.21% by 1:00 P.M., continuing a rally that seems to have no end. The price of the stock is up 17.8% since June 23 (chart here) when the company announced better then expected second quarter results plus a positive guidance for the upcoming quarter.

Based on the success of previous post (China ADR momentum stocks using 10-DMA and 30-DMA) when we highlighted stocks with outstanding momentum, we take a look at the week from a technical point of view. Notable Chinese ADRs are:

Financials led rally yesterday caught Chinese ADRs on fire, too. This week has been rewarding for China stock investors so far. As the following table displays, 38 Chinese ADRs are on the black vs. 8 on the red since last Friday. We are here to find stocks with outstanding momentum, a momentum that can carry on for the rest of the week. To accomplish this ambitious goal, we'll use simple technical indicators, 10-day, 30-day, 50-day , and 200-day moving averages or DMAs.

You got to love this: based on the Overbought/Oversold indicator, three stocks are set to do well today: Chine Unicom (CHU), China Eastern Airelines (CHA) and Huaneng Power (HNP). Remember, this technical indicator is posted for Advanced level subscribers at Chinavestor.com each morning before the market opens. See how you could have made money today: by looking at the chart

Shares of chinese companies listed on the U.S. exchanges opened up mixed. China Mobile (CHL), the world's largest mobile phone company by subscriber number came back strong in Hong Kong, signalling a good start for the day in New York. The positive outlook of the industry leader had a positive effect on smaller players such as China Ntecom (CN) and China unicom (CHU). All three Chinese telecom companies are between 2.38% and 1.55%.

Stocks in Asia and Europe rose at the end of the month as fears of a deep U.S. recession receded. Despite favorable global economic climate change, Chinese stocks haven’t regained their shine yet. As the chart on the page testifies Chinese domestic shares in Shanghai are off 35% year-to-date (YTD) a far cry for U.S. China stock investors whose benchmark, the China ADR Index is down by 16.7% YTD.

Large cap Chinese ADRs helped lifting the China ADR index (CAI) by 3.96 points. Still, the index lost a quarter of her value since the beginning of 2008 and jittery market conditions in the U.S. keep pressure on Chinese stocks. Couple of stock of interest: Aluminum corp. of China (ACH). The stock lost another -2.54% today on weak outlook. Today's performance came as no surprise to us, because events just unfolded as we predicted it on last Saturday. Here is the actual posting on the blog from last week

Unicom and Netcom have applied to the Executive for its consent to extend the date of despatch of the Scheme Document to a date no later than 16 September 2008. Unicom has also applied to the Hong Kong Stock Exchange for an extension of time for the despatch of the Circular, which is proposed to be despatched at the same time as the Scheme Document, to a date no later than 16 September 2008.

Last week we published a study that looked at 10- and 30-day moving averages and their crossing patterns to find momentum stocks. We continue with some technical analysis today by introducing the Overbought/Oversold techincal indicator. The one we use gives investors a gauge of the market in a snapshot by laying down all Chinese ADRs on a single paper. This method makes it very easy to find stocks that are out of their normal trading characteristics; thus offering trading opportunities.

The boards of directors of Unicom and Netcom refer to (1) the Announcement on Deepening the Reform of the Structure of the Telecommunications Sector dated 24 May 2008 jointly issued by the Ministry of Industry and Information, the National Development and Reform Commission and the Ministry of Finance of the PRC which states, among other things, that the PRC government will deepen the reform of the structure of the telecommunications sector, and encourage the formation of three market competitors where each has nationwide network resources, relatively comparable strength and scale, as well as full service operation capabilities, that the allocation of telecommunications resources will be further optimized and the competition structure will be improved, and that three 3G licences will be granted once the contemplated restructuring is completed, and (2) the announcements issued by Unicom and Netcom on 25 May 2008.

China's telecom industry restructuring got the green light on Saturday, May 24, 2008. This is the Chinese telecom landscape before and after. While the general idea of leveling the battleground for telecom players may sound well, the end result will be three seemingly similar, yet different companies. As an investor, you should look into details to get ahead of the game.

If there were no expectations on a potential revamp of telecommunication industry, China Unicom would be considered overvalued at current price although it reported doubled profits for 2007 full year result, however, considering the revaluation of two networks of China Unicom in the case of the restructuring, China Unicom is a good buy at current value. We will address these points below in detail:

In 2007, our total revenue was RMB99.54 billion, an increase of 4.4% from 2006. Our service revenue was RMB94.64 billion, an increase of 3.9% from 2006. Service revenue from our GSM business was RMB62.78 billion, while service revenue from our CDMA business was RMB27.73 billion. Service revenue from the long-distance, data and Internet businesses amounted to RMB4.13 billion. Our profit for the year was RMB9.30 billion, an increase of 144.7% from 2006. Basic earnings per share reached RMB0.713, an increase of 136.1% from 2006. Excluding the effect on changes in fair value of derivative component of convertible bonds and tax refund on reinvestment, our profit before income tax would be increased by 19.9% from 2006, profit for the year would be RMB7.09 billion, an increase of 14.4% from 2006, while basic earnings per share would reach RMB0.544. Our debt-to-capitalization ratio declined from 24.3% as at the end of 2006 to 3.8% as at the end of 2007. Free cash flow was RMB6.61 billion.

The Board is pleased to disclose the operational statistics of the Group for the month of February 2008. The Board of the Company (the “Board”) is pleased to disclose the operational statistics of the Company and its subsidiaries (collectively the “Group”) for the month of February 2008. Operational statistics for the month of February 2008 and the comparative figures for the previous month are as follows:

A near 20 percent correction in the Chinese stock universe in January marked the worst month for Hong Kong equities since Oct. 1997 as rising risks of a U.S. recession prompted a global equities sell-off. As the following chart suggests, the Hang Seng Index of Hong Kong lost 15 percent in January alone. U.S. listed Chinese stocks did not make it any better as the broad China ADR Index or CAI lost 14.7 percent, too. U.S. stocks held up better, sending the DJIA down 4.9 percent for the month to 12,650. To make matters worse, ratings agency Standard & Poor's said it cut or may cut its rating on up to $534 billion of subprime bonds. Where is the bottom? Where do Chinese ADRs go from here?

Shares of Baidu.com, China's premier search engine, continues the rally it started yesterday on allegation that it acquired web browser company Maxthon. Baidu was heavily oversold lately despite stellar Q4 financial results. At this point Baidu.com Inc. (BIDU) has more upside potential as is demonstrated by its reaction to the positive news. Another top mover is Ctrip.com (CTRP), China's leading online travel agency. The stock is up $4.18 or 7.65% after reporting better than expected Q4 and 2007 full year financial result. Revenue topped forecast while earnings doubled.

Trina Solar (TSL) surprised investors with a stunning 15% steady advance throughout the day. Large cap stocks dominated today with CNOOC Ltd (CEO) gaining $4.00 on strong oil prices. Shanda (SNDA) continues to really before earnings announcement later this week. CHL is up $0.88 on news that industry restructuring might not take place as thought. CHU was sold heavily in overseas markets of Hong Kong and Shanghai earlier the day.

China Mobile reported record number of subscriber growth in the month of January 2008. CHL added 7.044 million new subscribers in January, now serving 376.38 million users -- more than the population of the United States. This is outpacing Unicom's relatively paltry 1 million-plus for the same time.

China Mobile (CHL), the largest telecommunication operator in China, enjoys the advantages of monopoly power, higher network coverage than its competitor China Unicom, strong customer loyalty and new customer acquisition abilities. In the near future, China telecommunication industry is expected to reform. The most likely restructuring plan would be that China Mobile (CHL) merges with the national railway's fixed-line unit, China Tietong. China Unicom's (CHU) GSM mobile business joins with China Netcom Group while China Telecom Corp (CHA), the country's top fixed-line operator, acquires Unicom's CDMA mobile telephone business

Chinese New Year celebrations closed down the Hong Kong and Shanghai Stock exchanges. This has no effect on the trading of Chinese stocks listed on U.S. exchanges. The China ADR Index (CAI) gained 21.14 points on Thursday, fueled by strong gains in the telecom sector, particularly CHL.