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).

Concerns over Lehman sent the Dow nose-diving, erasing almost all of the gains from the previous session. Chinese ADRs couldn't escape the bloodbath tracking Wall Street all the way. Shares of Baidu.com (BIDU), China's premium search engine company, got hit the hardest shedding $20.25 followed by CNOOC Ltd.'s (CEO) $10.41 fall. China's oil sector fell along weakening oil prices, a surprise for Sinopec (SNP) and Petrochina (PTR). Shares of PTR and SNP used to move in opposite direction from oil. High price of crude sent these large refiners into the red so easing oil should help them and not hurt. However market sentiment overrode conventional wisdom and all Chinese oil majors got hurt, as a result.

Big market days are good for the use of technical indicators. This is when technical indicators come into play by visually representing where a stock is trading relative to her peers. So from this respect yesterday was a good day - lot of action on the NYSE and NASDAQ. Chinese ADRs got caught in the wind and traded actively. But just to see where they are relative to their trading characteristics, the following picture is worth a thousand words. They are all beaten and oversold. Take a look at China Eastern Airlines (CEA). The stock has come down a long way with no clear indication where the bottom is.

News that Freddie Mae and Freddie Mac will be taken over sent American indices soaring for the day. Strong market sentiment spilled over to Chinese companies listed on U.S. exchanges. But just how much they rallied - or which ones made investors cheer or cry - is summed up by the following table. This table is designed to sort Chinese ADRs based on their performance measured by change in dollars. The best stock was Baidu.com (BIDU), China's search engine giant, adding $3.72 to Friday's close. The stock is way oversold and is seen by many as a possible come back kid. Stronger dollar pushed Asian refiners higher as oil fell. Sinopec (SNP), China's largest refiner gained $.74 followed closely by Petrochina's (PTR) $.36 gain.

Chinese ADRS crashed along the DJIA for the week. But there are some notable exceptions like E House (EJ), Comtech (COGO) or The9 Ltd (NCTY). We like Shanda (SNDA), another player from the Chinese online game landscape, and industry leader. Baidu.com (BIDU), China's search engine giant disappointed and solar companies were on a losing streak following strong showing in August. For detailed breakdown of the last week, please find table below.

DJIA lost 344.65 points yesterday, a plunge Chinese ADRs could not escape. Results of weak U.S. performance proved to be disastrous for Chinese equities listed on the NYSE and the NASDAQ. As the following picture demonstrates, the China NASDAQ Index (CQI) lost 46.5 points and is down 20.46% YTD.

The travel industry in China has experienced tremendous change during the recent years with traditional travel companies fading, losing appeals and market shares. Profits decreased sharply as competition became fierce so that companies had to cut their price dramatically to attract customers. On the contrary, new companies like Ctrip.com, eLong and Mangocity have drawn customers’ attention and thrived, representing a relative new industry was born. These companies brought internet and other high technology to their traditional call centers, integrated airline ticketing, hotel reservation and packaged tour together to attract a significant number of “middle class” and young people who do not want to join traditional tourist group but want to customize their tour and still benefit from the low costs. With the number of internet users and “white collar” workers increasing exponentially in China recent years, the potential of such travelling business is becoming remarkable. Despite China shows signs of slowing down, its economy is expected to increase at a considerable rate for the foreseeable future. The demand of such service is going to increase as people’s imposable income keeps rolling over and paid-holiday system keeps improving.

Solarfun published a sound Q2 report on Wednesday. By June 2008, Solarfun reported revenues reach US$ 197.1 million, which increase by 12.7% on quarter-over-quarter (QoQ) basis and 192.2% on year-over-year (YoY) basis. Although current stock market does not perform well due to the high inflation global economics, we still recommend investors holding this stock. As green energy supplier, Solarfun owns its born advantage in current unfavorable energy market. Besides, through objective and rational analysis at current capital market, we believe that behind systematic risk on global market, values for individual stock needs to be emphasized and analyzed from specific angles and be considered within long term time horizon.

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.

Most Chinese investors are increasingly turning bitter realizing that Olympics related hopes of a fast recovery of the stock market is fading away. But remember, we pointed out in our last Newsletter that Olympics related investment activity is tiny compared to the overall size of the economy and thus we don’t expect the Games to have a significant impact on equity markets. This projection turned to be true as the month of August passed away without any significant change in the direction of the Shanghai Composite Index or the China ADR Index. But solar companies rallied all over the board in August thanks to robust earnings. As the following table of Chinese ADRs sums it up, the best three stocks for aug 2008 were from the solar sector: Suntech (STP), Trina Solar (TSL) and Solar Fun (SOLF).