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Excerpt from Cabot China & Emerging Markets Report Update 5/8/08

By Paul Goodwin, Analyst and Editor, Cabot China & Emerging Markets Report

Most of our stocks (and most of the rest of the market) took a sharp blow from the market on Wednesday, but it doesn’t concern us overmuch. There are a couple of reasons for our lack of concern. First, the correction hit the entire market, top to bottom and East to West. It wasn’t like a vote against the emerging markets and in favor of the developed world. Second, it looks like the day will be bracketed by gains, which doesn’t take the sting out, but helps to assuage the fear.

Our stocks are acting well, and are presenting some excellent buying opportunities courtesy of this pullback.

The overall picture in emerging markets investing remains generally positive. China has sent the Olympic flame to the top of Mount Everest and is continuing the countdown to the Summer Games. The European Central Bank and the Bank of England have both met and decided to leave interest rates in their areas unchanged. The general trend in the U.S. stock market is bullish, despite a near-constant stream of horrible news. In other words, the situation is excellent.

Markets didn’t make any decisive moves today, rising slightly as oil prices eased a bit. But the longer-term influences still seem to be in place. Investors expect things to be better in six or nine months, and they’re in the early stages of trying to sort out the stocks that will benefit as things improve. The Dow, the Nasdaq and the S&P 500 all gained less than 1% today, with the Nasdaq up 13 points (+0.5%), the S&P 500 up 5 points (+0.4%) and the Dow up 52 points (+0.4%).

The 6500-6600 level continues to look significant to the Halter USX China Index. It was where the market double-topped in February before its big March correction, and it put up a few days of resistance in April as the China market was heating up. So when it provided a support level yesterday, it was hardly a surprise. If the Index keeps above that level, everything should be fine. The Index finished today up 63 points, or 1.0%.

We’re making two changes in today’s update.

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