Investing in Chinese equities is a risky business. But one can ask: how risky? Is there a reliable risk measure geared specifically to investors who navigate in the Chinese stock universe? Our current Newsletter addresses this very important question and will shed light on stocks that are relatively safe and stocks that you should avoid.

Liquidity, or the ability to buy and sell large blocks without effecting the share price, is perhaps the most important factor for institutional investors in choosing where to execute their trades. Looking at the Chinese stock universe from an American investor’s point of view, there are three markets that investors would consider: the NYSE, the NASDAQ and the Hong Kong Stock Exchange. Investing in Shanghai and Shenzen is still limited for foreigners and is further complicated by corporate accounting differences and information asymmetry.

Based on the enthusiastic feedback we received from several of our clients, we attempt to use the same methodology to give a unique analysis of the NASDAQ listed Chinese stock universe. What makes our analysis very relevant is that seventeen liquid Chinese NASDAQ names reported quarterly earnings in the month of May, 2006.

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.

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.

Chinavestor noticed when China Mobile (Hong Kong) Ltd. (CHL), the world’s biggest wireless carrier, announced on Dec 13, 2005 that it is seeking to sell shares domestically to complement Hong Kong and New York listings. And again when Aluminum Corp. of China (ACH), the world’s second largest alumina producer, announced plans to take its A-share companies private, paving a way for its own listing in mainland China. The Company will need a total of more than 5.6 billion yuan ($694 million) to buy the shares it does not own in it’s A-share units.

Chinavestor “Stock of the month” ends up 5.2% in 2005 and is up 55.6% since inception, despite the fact that China’s booming economy failed to translate into stock-market gains. Defying rises in oil prices and interest rates, Asia stocks rose as domestic economies picked up and foreign funds sought cheap valuations. But the country level performances were far from uniform with indices in the greater China region at the bottom of the list.