Extraordinary times. This comes in mind first when I’m looking back to the month of September. Extraordinary volatility, events and an outlook that’s still uncertain. October 2nd. may be a better time to find directions for the market following the vote in the House but for now we have to focus on past events. Looking at the chart tracking major indices in 2008 doesn’t make investors smile. The DJIA lost over 20% by September 29 though it came back 485 points on the 30th—the best day in six years. But make no mistake, the third quarter of this year was one of the worst for China stock investors since 2001.

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.

Quick outlook for Chinese ADR trading today. What we knew before, that Lehman's drag on the DJIA will have significant impact on Hong Kong and Asian trading, came as no surprise. As the saying goes " if the U.S. sneezes the world catches a cold" proved to hold true again. Hong Kong listed Chinese shares, H-shares, were on retreat as a result. The good news is that Shanghai listed Chinese shares, a market that is largely closed for global equity funds, was less effected by U.S. sentiment but rather took refuge in lower oil and high trade surplus news. Sinopec (SNP), Asia's largest refiner gained 1.34% in Shanghai (SHA:600028) while it fell 3.58% in Hong Kong (HKG:0386).

Shares of Chinese companies listed in U.S. exchanges performed relatively well in July, spurring investor optimism. By term “relatively well” I mean compared to the DJIA or compared to previous months of the year. As the following chart tracking Chinese equities in Shanghai, Hong Kong and New York testifies, July was a comeback month for Chinese and American shares alike. The DJIA eked out a modest 2.1% gain for the month but the true beneficiaries were the U.S. listed Chinese equities. Looking at the performance of the China ADR Index in dark orange, the index gained an impressive 8.0% just in one month, closing in on the Hang Seng and the DJIA.

Chinese ADRs are trading mixed today after the lunch with NASDAQ listed names shining more. Baidu.com, China's premium search engine company, is up $7.15 or 2.15% at $339.55, extending gains from last week following better-then-expected earnings. As the following table testifies, large cap NYSE listed Chinese ADRs are pulling down the China ADR Index (CAI). The index lost 24.4% year-to-date (YTD) with notable difference between NASDAQ and NYSE listed ADRs. While the market cap weighted overall index lost almost 15% YTD, NASDAQ listed Chinese ADR Index or CQI holds up much better by shedding -15.4% YTD. This performance is not much different then major U.S. indices themselves.

After two hours of trading it seems as if we got it right: oil refiners Sinopec (SNP) and Petrochina (PTR) are up $2.73 and $2.72, respectively while CNOOC Ltd. (CEO) is on the bottom of the list by giving up $2.17. You might call it an easy shot after softening oil prices it was no brainer how the Chinese oil triumvirate will trade.

Chinese companies listed on U.S. exchanges opened mixed today, reflecting the uncertain direction of U.S. markets today. Notable companies are 51job Inc. (JOBS), Yanzhou Coal (YZC) on the positive side and Baidu.com (BIDU), CNOOC Ltd (CEO), Sinopec (SNP) and China southern Airlines (ZNH) on the negative side.

Rising tension in the Middle East send oil higher. Iran fired 9 long and medium range missiles in the Hormuz straight, increasing tensions in international oil markets. Result: oil is up again - Stocks pull back in early trading as oil rebounds As the following chart from Google finance clearly demonstrates, when oil goes up airliners tank. We have two large Chinese airliners listed in US exchanges - Chinese airliners had a great day in Hong Kong while we were sleeping. As the following short summary of most active stocks in Hong Kong testifies, shares of China Southern Airlines (1055.HK) gained 5.9%. Air China (0753.HK) went up 5.4% while China Eastern Airlines (0670.HK) gained 5.0%.

Shares of Chinese companies listed in the U.S. opened mixed to day after steep losses in last week. oil compnies are in focus again. China's offshore specialist, CNOOC Ltd. (CEO), is enjoying a ride on the back of strong oil prices. The stock is up $4.25 or 2.68% at the open. High oil prices hurt refiners. Asia's largest refiner, Sinopec (SNP) opened -0.23 percent lower while Petrochina (PTR), China's largest oil produceer with a significant refining on its own, opened -0.65 percent lower. China's decision to increase gasoline and diesel retail prices last week sent prices of refiners out the roof just to see them tumbling the next day. Overall SNP and PTR are trading sideways signalling as if the markets haven't figured out what to make out of the price increae combined with record oil prices yet. SNP is red while PTR is blue on the following chart.

Shares of Chinese ADRs followed suit tracking Wall Street lower this week. As the following table sums it all up, Chinese ADRs fell -4.2% this week, on average. Losers outnumbered stocks that closed higher for the week by 35 to 11.

We took the risk to say a month ago that “we think Chinese equities are nearing the bottom. Looking at Asia and China in particular, we find both macro and micro economic data to fuel our optimism. “ Since then the China ADR Index (CAI) rallied 7.5% in line with the Hang Seng’s 7.0% comeback, outshining the Shanghai Composite’s modest 3.7% rally. Have Chinese equities bottomed out?

Stock markets in the U.S. continued to slug: inflation concerns and high oil kept pressure on equity markets. Tuesday's economic data illustrated how the steep run-up in energy costs this year is affecting businesses. The Labor Department data showed that producer price index jumped 1.4 percent in May, the largest increase since last November. The DJIA shed 108.78 points. The S&P 500 index, a measure of the broader market, fell 9.21 points to 1,350.93, while the Nasdaq composite index fell 17.05, or 0.69 percent, to 2,457.73.

During the reporting period, the aviation market has seen steady growth in demand, and the Group persevered with the strategic transformation toward an internationalized airline with network economy. The Company dealt with pressures resulted from soaring jet fuel prices by enhancing the operating efficiency of its principal businesses and reinforcing its control over costs. During the reporting period, the growth rate of the traffic volume was significantly higher than that of capacity, and the growth rate of operating revenue was also higher than that of operating costs and capacity, leading to a remarkable improvement of operating efficiency. The gain from exchange as a result of the appreciation of Renminbi has further improved the Company’s performance.

During the reporting period, the booming domestic aviation market directly led to the rapid development momentum of the air transportation business. The exchange rate of Renminbi against major currencies such as the US dollar continued to appreciate. Under the precondition of ensuring flight safety, the Group continued to improve its corporate governance and business model. However, due to fierce competition in the industry and skyrocketing fuel prices, the Group was faced with comparatively significant cost pressures. The Group dealt with such pressures resulting from high fuel prices by optimizing the structure of flight routes and the composition of fleet, increasing its overall revenue, taking a series of fuel-saving measures and utilizing financial derivatives. In order to cope with the soaring jet fuel prices, the Group continued to reinforce financial budget management and cost control. It also improved the performance-assessment-by-objective mechanism geared towards operating efficiency of the flight routes network. All of these helped to realize a satisfactory improvement in operating standards and results benchmarks of the Company

On 18 April 2008 (after trading hours), Xiamen Airlines and Boeing entered into the Boeing Aircraft Acquisition Agreement, pursuant to which Xiamen Airlines agreed to purchase the Boeing Aircraft from Boeing in accordance with the terms and conditions thereof.

Reference is made to the announcements of China Southern Airlines Company Limited (the “Company”) dated 6 July 2006, 16 April 2007 and 28 June 2007. The Company had entered into a sale and purchase agreement with Airbus SNC dated 6 July 2006 pursuant to which the Company agreed to purchase 50 Airbus A320 series aircraft from Airbus SNC.

Reference is made to announcements of China Southern Airlines Company Limited (the “Company”) on 6 September 2005, 16 April 2007 and 28 June 2007. The Company had entered into a sale and purchase agreement with Airbus SNC on 6 September 2005 pursuant to which the Company agreed to purchase 10 Airbus A330 aircrafts from Airbus SNC. The acquisition was considered and approved at the 2005 First Extraordinary General Meeting of the Company on 16 December 2005.

A near 20 percent correction in four weeks has wiped $700 billion off the Shanghai Stock Exchange, making global investors nervous about a possible China meltdown. Considering the 132% run of the Shanghai Composite in 2006 and a subsequent 125 percent run in 2007 before the current pullback, a bubble theory has ample room to develop. The question is this. Is there a bubble and if so how to hedge against that?

The last trading day of September was a happy one. Our favorite proxy for the overall China ADR* universe, the iShares FTSE/Xinhua China 25 Index (FXI), closed at $180.00 marking an exact 20% run over the month. What makes this rally even more remarkable is the strong underlying volume. We know that Hong Kong is the home market for the most prominent FXI components. So we found comfort in the news that Hong Kong blue chips rose 0.3 percent amid unprecedented volume on Friday, September 28th, closing out the quarter with their best gain since the end of 1999. The Hang Seng Index gained 13.6 percent for the month and 24.7 percent for the three months ended in September.

The good news is that both Hong Kong - NYSE listed airliners, China Eastern Airlines (CEA) and China Southern Airlines (ZNH) were hot in Hong Kong. CEA went up 7.4% while ZNH closed 4.5% higher. Air China (0753.HK), not listed in the U.S., went up 3.7%. Looks as if the market knows something. Think we should listen.

What did I predict? If U.S. falls Chinese small caps will tumble. Here it is. Next week Monday and Tuesday will be even worse. Recovery on Wed-Friday. Watch!

CEA's September record month through the eye of an analyst. Factors contributing to the ups and downs and finally, lessons to be learnt.

Hope you had steel nerves in August. Referring back to the main article in our previous Newsletter, “Strong stomach needed”, we could not have timed that article better. August turned out to be a heck of a month. U.S. subprime problems put pressure on equity markets globally, sinking our favorite proxy for U.S. listed Chinese stocks, the FXI, 15 percent by Aug 16th. Then the FED’s decision to lower inter-bank lending rates by a half point sent our benchmark up 20 percent by Aug 27th, just to see those gains evaporate the next day. Still, investor optimism fuelled the index to a 7.43 percent gain for the month, attributed to further rate-cut hopes and news that the U.S. governments would help tackle the subprime mortgage problem.

China telecom stocks (CHL, CN, CHA, CHU), China Life Insurance (LFC) face a potentially GREAT day. Plus take a look at the China stock universe from a technical point of view.

Market update: reflections on the Pre-market report at 11:00A.M.

Before the bell: what to expect from today's Chinese adrs. CEA, ZNH, BIDU, CEO,

China Southern Airlines (NYSE:ZNH) 2007 fist part of the year: food for thought...

What keeps Chinese stocks rising? Strong fundamentals, usch as earnings; excess money flooding Chinese exchanges; Yaun/$.U.S. exchange rate change.

Chinese stocks have risen since the notorious 9 percent intraday plunge in late February. As the matter of fact, the Shanghai Composite (^SSEC) is up almost 25 percent since the incident while the record breaking DJIA barely keeps space with such a sharp rally.

We are bullish on Chinese stocks. It seems to us however that average American investors got a distaste of China after the 9 percent plunge in Shanghai on February 26 that sent global equity markets south. As a result, March has been a very quiet month for us, stock researchers, while this was the time stock research would have been needed the most. We will get back to this later.

Earnings announcements are one of the most important moments for public companies. This is a bonanza for fundamental analysts who can x-ray the companies by examining these financial statements.

Our previous Newsletter focused on the NASDAQ names of the U.S. listed Chinese stock universe. As we said, this issue will give readers a unique perspective of the NYSE listings. As the following chart shows, we chose the twenty biggest names by revenue from the NYSE universe this time . We will compare them to make a point that not everything that shines is gold. In other words, not all the big liquid names offer investment opportunities just because China is growing fast.

I can’t help but quote from our February Newsletter, page 4 last paragraph. “Based on our latest field trip to China, Chinavestor.com expects The9 Ltd. (NCTY) to report a nice surprise. On the other hand, we did not see much activity of Shanda’s line of products and expect the battled game and home entertainment developer to slip.” End of quote. So when Shanda released earnings after the close on February 27th, disappointing news did not surprise us. China’s top online game operator said it swung to a quarterly loss and missed Wall Street revenue targets as online game sales weakened, sending its shares down 19 percent after hours.