In a nutshell, what is the FTSE Xinhua Index Series (FXI)?

FXI was created to provide real-time indices for the Chinese market. The series consists of large cap tradable indexes, broad-based benchmarks and sector indexes providing coverage of the Shanghai and Shenzhen stock exchanges, together with all other Chinese share types. These indexes were designed to ensure transparent, clear and consistent data.

Yes, Barry, I do recommend that the individual small investor participate in the growth and development of the Chinese economy through an investment in the FXI. But, only on the condition you know something about it, and the component stocks.

To do that, go to the website www.ftsexinhua.com, which publishes the daily closing index value, historical values, constituents weighting, constituents market capitalization and daily percentage changes of the FXI. At this website, you will find the following info that is indispensable:

Brochure on FTSE/Xinhua Index Series

Brochure on FXI

45 slide perspective on China's market and the FTSE/Xinhua Index

Overview of FTSE Global Classification Universe & System

All of it good stuff.

I also received e-mail from my associate Edward Liu, who runs a small Vancouver-based consulting business for hedge funds, broker-dealers and mutual funds, called RiskFile. I have referred to Edward's work previously in my blog because I assisted him in a small way in developing his analytical system and in return he has allowed me to co-publish quantitative analysis reports on about 100 stocks in China (including the 25 FXI components) plus other large cap stocks in Russia, Japan, India and Brazil.

If anybody is interested in receiving a copy of some of these reports, say Petrochina (NYSE: PTR) or China Telecom (NYSE: CHA), please e-mail me.

So, Edward wrote: "Hi Bill: as you know, I provide weekly commentary articles on one of the major daily Chinese language newspapers of Canada, World Journal. China is the major topic of my column. I like your last week's series on China. Few investors here know what's going on in China, and you provide them valuable information. Your selections of the Chinese companies are indeed among the best.

There's only one general problem with Chinese companies: the weak linkage between return on equity and macro economy. For example, the real estate price in some of the biggest cities in China has doubled in the past few years, but the profit of the public real estate companies only see moderate increase. Too many people, such as senior managers, officers in key government departments, etc., benefited from the boom, leaving little to share holders. So we see the Shanghai security index collapse in last three years when China's economy enjoys its largest boom.

Ironically, I think the stock market of China will be greatly improved in the next couple of years, even though the speed of economy will slow down. You know China's economy grows at a rate of 9.5% last year, I think this will be the highest rate in these few years."

Edward Liu is a very well educated economist from Beijing who immigrated to Canada about five years ago. Like many Chinese in this country, he works hard at his craft.

I never know who reads my website and blog. Who knows, maybe the PRC Party leaders in Beijing have been impressed with my series on China?

BCara@BillCara.com