The China ADR Index (CAI), measuring market cap weighted performance of Chinese ADRs listed in the NYSE, NASDAQ, and AMEX, lost 28.30 points after two hours of trading today and is down by 28.94% year-to-date (YTD). Large cap, mostly state enterprises listed on the NYSE lost -29.02% YTD while small cap Chinese stocks fueled by entrepreneurial spirit are holding back a little better by losing 26.84% YTD.

Index	Date	Value	Today	YTD
CAI	7/15/2008	710.57	-28.30	-28.94%
CYI	7/15/2008	709.79	-28.21	-29.02%
CQI	7/15/2008	731.56	-30.60	-26.84%

Looking at individual stocks CDC Corp. (NASDAQ:CHINA) - a provider of enterprise software, online games, and internet services - is trading 12.72% higher on guiding 2008 second quarter above Wall Street estimates. Consensus estimates put CHINA's 2008 Q2 revenue to $101.7 million while the new revenue guidance is $107-$108 million. Net earnings are estimated to top previous estimates not only due to higher revenue estimates but lower costs - a combined effect that could increase earnings by 10%-15%. This puts CHINA's stock price at today's trading range of $12.5-$13.0.

As the following stock screener looking for China ADRs with significant price changes testifies, most of Chinese stocks are on the retreat. 3SBIo (SSRX) and Grand Toys Intl. (GRIN) boast sizeable change in percentage points however these gains are only $.10 and only one cent $.01, respectively; making a case for these stocks senseless.

TOP MOVERS			7/15/2008 11:30
Name	Symbol	Price	Change	Change%
CDC CORPORATION C	CHINA	$2.57	$0.29	12.72%
3SBIO INC	SSRX	$9.11	$0.10	1.14%
GRAND TOYS INTL A	GRIN	$0.16	$0.01	6.67%
COGO GROUP	COGO	$4.24	$0.00	0.00%
I-CABLE COMM LTD	ICAB	$25.55	$0.00	0.00%
TOMOTHERAPY INC	TOMO	$8.34	$0.00	0.00%
XINHUA FINANCE ME	XFML	$2.11	$0.00	0.00%
SINOVAC BIOTECH L	SVA	$3.35	$0.00	0.00%
KONGZHONG CORP	KONG	$3.96	-$0.02	-0.50%
ASIAINFO HLDGS IN	ASIA	$11.30	-$0.03	-0.26%
TRINA SOLAR LTD A	TSL	$28.75	-$1.56	-5.15%
HUANENG POWER INT	HNP	$25.51	-$1.58	-5.83%
CHINA LIFE INS CO	LFC	$51.82	-$1.64	-3.07%
CHINA TELECOM CP	CHA	$53.03	-$1.72	-3.14%
CHINA PETRO & CHE	SNP	$90.09	-$1.94	-2.11%
ALUMINUM CP CHIN	ACH	$25.92	-$1.98	-7.10%
PETROCHINA CO ADS	PTR	$122.83	-$4.10	-3.23%
SOHU.COM INC	SOHU	$63.77	-$4.72	-6.89%
CNOOC LTD ADS	CEO	$161.20	-$5.17	-3.11%
BAIDU.COM	BIDU	$279.61	-$11.79	-4.05%

It is much more appealing to examine what's going on in the downside. China's premium search engine company, Baidu.com (BIDU) slid below $300, a price not seen for exactly three months. We have been arguing that there is NOTHING WRONG with the company from a fundamental point of view. The company maintains an unrivalled position in China's search engine market and thanks to its proprietary technology, is making a successful inroad into Japan's search engine market. The company looks just as good when it comes to execution. Net income has been on a steady increase with no signs of slowing down. So one would ask - what's the problem then? The problem for Baidu is Google. As the following screenshot from Google finance testifies, price of Baidu.com is closely associated with Google's price. With that said, if Google is down over $9.8 or 1.98% as we speak, don't get surprised by Baidu's $11.79 drop.

Chinese oil companies are all on the slide today. CNOOC Ltd. (CEO), China's offshore specialist with NO refining capacity, tumbled $5.17 followed by Petrochina (PTR) giving up $4.10 and Sinopec (SNP) losing $1.94. This last slide is not associated with easing oil prices or other oil price related factors but to the news that Chinese regulators agreed to keep VAT rebate on imports in place. This means that deep reforms within China's oil industry are on hold for some more time, keeping uncertainties constant. See related article below.

Tuesday, July 15, 2008
China to extend oil product import rebate
BEIJING, July 15 (Reuters) - China plans to extend its VAT rebate on imports of diesel and gasoline, and subsidise crude shipments by its two biggest oil firms through the third quarter, a newsletter run by the official Xinhua agency said on Tuesday. The report in China Oil, Gas and Petrochemicals, citing only one "insider", said Beijing will give PetroChina (0857.HK: Quote, Profile , Research)(PTR: Quote, Profile, Research)(601857.SS: Quote, Profile , Research) and Sinopec Corp (0386.HK: Quote, Profile , Research)(SNP: Quote, Profile, Research) (600028.SS: Quote, Profile , Research) a payment of 800 yuan ($117.2) for every tonne of crude oil it imports for refining between July and September. It did not say if there would be a limit on rebates for oil product imports, which were capped in the second quarter at a total of 3.5 million tonnes of diesel and gasoline. But two state oil traders directly involved in diesel imports said they had not heard anything about the extension. Reuters

China's largest independent power producer, Huaneng Power (HNP), gave up $1.58 or 5.83% today - and this might just get much worse. Shares of the company trading in Hong Kong are suspended today until tomorrow's open on 2008 H1 news. The company reported power generation increase of 13% yet flipped to net loss from $360 million profit the same period a year ago. High coal price is to blame - a rise of 78% vs. last year. Shares of Chinese coal miners have been on fire but all power generators are on the red since last year. Not exactly knowing the magnitude of the net loss - news will come out later today - we see another 5%-10% potential downside for Huaneng.

Aluminum Corp. of China (ACH) is another stock on the slide today. The stock gave up $1.98 or 7.10% during the first two hours of trading, basically continuing the weakness since late February. Chaclo is struggling with high production costs, high bauxite prices and SOFT alumina prices. Overcapacity of alumina is to blame for soft prices of the commodity - and China and Chalco in particular - is responsible for such problems. On the other hand Chaclo is trading at a very low 9.0 P/E ratio and thus is very low prices. This might be a good time to pick up some additional shares in our opinion. The stock is trading at $26.02 as we speak.

Wish you successful investing!

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