Shares of Chinese companies listed on U.S. exchanges experienced one of the worst month in history. The China ADR Index (CAI), an overall barometer for the performance of all Chinese equitites listed on the NYSE and NASDAQ combined, lost -15.60% and the last trading day hasn't started yet.

Chinese stocks listed on American exchanges are down for the year 2008, tracking Wall Street sentiment relatively closely. CAI, CYI and CQI are market cap weighted indices and as such are tracking large cap companies very closely. China telecom sector got caught on fire in the afternoon on news of a possible industry revamp and its implications. CHU, China's smaller mobile carrier is expected to benefir from the industry reshuffle. China Unicom rose 2.2% to $22.78.

The China ADR Index (CAI) lost -9.57 points to read 863.61 by noon on Monday. NYSE listed Chinese equities held up better, the China NYSE Index (CYI) lost only -9.38 points while the China NASDAQ Index (CQI) is down by -14.21 points. Oil stocks are weighting on the index heavily. Index heavyweight PetroChina (PTR) lost $2.63 or -1.78% to $145.20 dragging down the index. Asia's largest refiner SNP lost $2.48 or -2.12% while offshore specialist CEO lost $2.48 or -1.70% to trade at $143.02.

Chinese stocks made a modest comeback by noon on Friday. The China ADR index, measuring cap weighted performance of 67 Chinese stocks, is up 0.35 percent. NASDAQ names are up almost one percent. NYSE names are laggards.

The problem is that this upswing is not likely to cause any effect on current NYSE and NASDAQ listed prices of Chinese shares, simply because this bounce back was caused by Wall Street and not the other way around. Basically Hong Kong listed prices just reacted to yesterday's trading in the U.S. and as such will have negligible effect on today trading.

9:30 A.M. reading: Chinese indices plunged with NYSE listed Chinese stocks most. NASDAQ listed Chinese stocks have been already beat up and finally, NYSE names came down, too. PetroChina (PTR), Sinopec Corp (SNP), China Telecom (CHA) and China Mobile (Hong Kong) Ltd., (CHL) dragged the NYSE listed China stock index (CYI) to historical lows since its inception. CYI lost -13.15 percent versus last Friday, posting its single biggest one day drop ever. Among NASDAQ names, Baidu.com Inc. (BIDU) , Focus Media Holding Ltd. (FMCN) , Ctrip.com (CTRP) and JA Solar Holdings Co. (JASO) were most severely hit.

With all these changes ahead, China stock investors want to know why China Mobile (CHL) is boosting a significantly higher subscriber grow rate than China Unicom. Is it because of China Mobile's wider coverage and superior network? Does CHL have better coverage in rural areas? How good/bad is CHU's CDMA network?

U.S. listed Chinese stocks came back strongly by the end of the day, NYSE names in particular. China Mobile (CHL), China's largest mobile operator came back especially strong by gaining $2.67 or 3.75 percent on Friday to finish at $77.39. Some of the institutional investors made use of the opportunity to pick up good quality stocks.

U.S. listed Chinese ADRs plunged on Thursday, suffering their worst two-day fall. As the following table shows, the "China ADR Index" (CAI) is down by -12.28% year-to-date (YTD), the "China NYSE Index" (CYI) is down by -11.95% YTD, and the "China NASDAQ Index" (CQI) is down by -21.0% YTD. These indices are market cap weighted and are set at 1,000 as of January 1, 2008.

Current market conditions give us a great deal of concern, especially for shorter term investors. We don’t know all the answers but will reflect on current situation and formulate a defensive strategy. All three major U.S. stock indexes plunged more than 2 percent on Tuesday after a record loss at Citigroup and the worst showing for retailers in five years fuelled fears that the economy was heading into recession. JP Morgan missed earnings estimates, just as Intel did. No wonder, Chinese ADR tanked alongside. One may ask: where is the bottom? Honestly, we don’t know. But this is what we know:

Telecom industry restructuring is imminent in China. We identify forces behind the scene, seek answers, share opinions and thoughts what China telecom industry might look like after the bing bang.

PetroChina closed down $-1.04 (-0.60%) at $173.00 while the DJIA added +171.85 points or 1.36%. What's wrong with PetroChina? I want you to read the following story: China '07 crude imports up 12pct, uptrend seen firm BEIJING, Jan 11 (Reuters) - China, soon to overtake Japan as the world's second-largest crude oil importer, boosted purchases by 12.4 percent last year as the economy boomed, domestic production growth stalled and new oil storage tanks were filled.

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?

Can’t help but to start with a quote from the previous Newsletter, saying “Based on our cautious but still bullish outlook for the U.S. markets, coupled with our strong outlook for the China stock universe, we think October can potentially be another great month for China ADR investors”. And indeed, October turned out to be another great month—only for the smart investor! Chinavestor picked stock of the month, China Life Insurance (LFC), is trading above $100 vs. $88 at the beginning of the month. Plus Growth and Conservative Portfolios (Update on Page5) are ahead 13.8% and 11.0% , respectively.

At Chinavestor we have always argued that investors have to understand the fundamental differences between NYSE and NASDAQ listed Chinese companies. NASDAQ listings offer higher retunrn in general but at a price of higher risk.

I just wanted to share a couple of factors to consider before making a prediction for the upcoming year in 2008. Overall I'm bullish in China but I don't think the spectacular gains in the last three years will be repeated. Here is why.

Chinavestor is proud to announce the launching of three China ADR indices. The "China ADR Index" (CAI), the "China NYSE Index" (CYI), and the "China NASDAQ Index" (CQI). These indices are market cap weighted and are set at 1,000 as of January 1, 2008.