China's largest coal miner by output reported a 13.3% increase in commercial coal production in May 2008 from a year ago. Export of Chinese coal came to a standstill in 2007 as China is struggling to feed its growing electricity demand. Nearly two-thirds of Chinese electricity is generated by unsing coal fired power plans. The winter storm related coal supply shortages just highlightened the problems facing both the cola nad the power generating industry.

We published a list of chinese stocks last week. The criteria we used was very simple: if 10 DMA was above 30DMA, a stock qualified. The result is not too rosy: stocks on average lost -6.5% between 6/6 - 6/13. Well, it is also noteable that last week was a bloodbath for Chinese stocks not just in the U.S. but worldwide. The Hang Seng Index in hog Kong lost 1,810 points from 24,402.18 points to 22,592.30. This is a 7.4% drop just in one week!

As resolved at the annual general meeting of the Company convened on 9 May 2008, it was approved to issue medium-term bonds with a total principal amount of not less than RMB3 billion and not more than RMB10 billion (the “Medium-term Bonds”). Pursuant to the approval granted by the National Association of Financial Market Institutional Investors on 22 May 2008, the Company may issue medium-term bonds with a total principal amount of up to RMB10 billion in the People’s Republic of China by various tranches effective on or before 20 May 2010.

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.

From the annual income statement, Chalco achieved major improvement in revenue, increasing from 37,826.5 million RMB in 2005 to 76,180.4 million in 2007. This significant increase was mainly due to its several acquisitions during 2006 and increasing global commodity price. The acquisitions increased the production capacity dramatically. Total revenue had increased 17.5% from 2006 to 2007. However, as the continuing strong demand from Asian countries especially from China had been pushing the sales price up, the global oil price had increased as well to push up the cost of the industry. Specifically, Chalco’s cost of revenue went up from 43,930.7 million in 2006 to 57,197.5 million in 2007, representing a 30% jump. The significant increase in cost resulted in the net income had dropped 15.6% from 11,726.5 million to 9,899.6 million. In addition, gross profit margin dropping from 32.2% in 2006 to 24.9% in 2007. Also, operating profit margin and net profit margin decreased 7.68% and 5.09% respectively during the period from 2006 to 2007.

A very dear Chinavestor client has been encouraging me to develop a filter that tracks 10-DMA and 30-DMA for Chinese ADRs and keeps track of the developemnt of such values. All basic and advanced technical tools widely used by the small investor comunity can draw charts to display the divergence between the two indicators. But the problem is that if someone wants to gauge all Chinese ADRs in the market, it takes time to visually observes each chart.

Wall Street saw better days then today. The DJIA is down over 300 points on high unemployment rate and record oil, approaching $150 a barrel. No wonder, shares of U.S. listed Chinese companies, or ADRs, follow suit measured by the broad China ADR Index or CAI. As the following table demonstrates, Chinese ADRs lost 3.41% today however there is a significant difference between NYSE and NASDAQ listed ADRs. While index heavy NYSE listed China stocks lost ground, measured by the China NYSE Index (CYI), NASDAQ listed Chinese ADRs hold ground thanks to a superb performance of NetEase (NTES), The9 and some solar companies.

Price of Aluminium Corp. of China (NYSE:ACH) is down 18% year-to-date. This should not surprise many as the company reported weak 2007 Q4 and an even worse 2008 Q1 financial results. The company had to tap into short term borrowings of RMB 4.7bln in order to keep cash flow position stable. However this took a hit on liquidity measures. Underlying reason is overcapacity of alumina. For additional info, read the following story.

The underlying reason for the drop is very simple. The company announced in a statement that the provincial government of Shandong, where Yanzhou Coal is headquartered, had introduced a temporary price cut for thermal coal in the next three months. The argument goes that the provincial government wants to secure electricity production for the upcoming summer months when demand peaks. We saw Huaneng Power (NYSE:HNP), China's largest independent power generator, to report an 80% drop in first quarter profits due to high coal prices. The problem is that state-set power prices have not been increased since June 2006. Some fear that high coal prices prevent local power generators to stock up coal before the peak summer season, endangering smooth power supply.

We have noted the recent decrease in the price of the H shares of the Company today and wish to state that we are not aware of any reasons for such decrease. We also confirm that there are no other negotiations or agreements relating to intended acquisitions or realizations which are discloseable under Rule 13.23 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), neither is the board of