The Shanghai Composite appears to breaking down with last week marking the second consecutive down week for the composite and a clean break through the 50 DMA. This might be a good time to dust off my old Chinese ADRs spreadsheet. If you want an Excel version of it grab it from here.

While we can’t invest in the Shanghai Composite we can invest in China via ADRs and the FXI, which has a strong correlation to the composite and comprises more stable companies. (See the chart below). I don’t have a lot of exposure to China….ummmm…actually what the frig am I saying. I live in Australia. I have a massive exposure to China. Forgetabout the FXI, Australia is the proxy for China. Where China goes so too goes our economy, our currency and our stock market. Fortunately, there is no other country I’d prefer to bet on for the long term than China.

The Shanghai Composite may be breaking down, but ultimately the high of 6124 recorded back in October 2007 will get taken out and become a distant memory. Though there could be some more pain prior to that happening.

For now though, let’s get back to our direct China exposure.

• KongZhong (KONG) the Wireless value added services come mobile games and internet portal company fell hard on Friday. I sold half of our KONG before going skiing two weeks ago. I know I said “I’m happy to keep my oxygen mask on and hold KONG” a mere week before that, but with the price going straight up and the earnings coming out while I was on holiday I had to trim. Besides which, if you’ve skied in Australia you know it was either that or remortgage my house! Damn it’s stupidly expensive to ski in this country!
• Suntech Power Holdings Co. Ltd. (STP) fell hard on Thursday in its usual volatile fashion.  Suntech remains a long term holding, though I have been known to trade it at extreme valuations. Wind and solar will be permanent features of our future and as the lowest cost solar player Suntech is well positioned.

Other Chinese ADRs I keep an eye on include Ctrip.com International Ltd. (CTRP) the travel service provider and Sohu.com Inc. (SOHU) China’s Google, NTES and SINA are blips on the outer edgers of my radar. None are where I’d buy them.

Circling back to Australia. The Australian dollar has now retreated from its recent high over $0.84USD and is now trading at $0.817. I still see parity as the most likely mid term outcome for AUD:USD. For personal reasons, read rat belatedly fleeing the sinking ship, I’m hoping the AUD temporarily weakens against the GBP, but that has not happened yet. There was a very orderly decline on the Australian share market today, easy come easy go for that 120 points on the S&P / ASX 200.

As I said on Friday the Australian market looks overbought to me and a fall back to the 50 DMA around 4000 wouldn’t take much. CFDs or puts on XJO anyone?

Related posts:

1. S&P/ASX All Ordinaries vs S&P Composite P/E
2. KongZhong Falls Back to Earth