Dear Fellow Investor,

The markets have been traveling a rocky road the past six months, making the first half of 2008 a volatile one for economies all over the world.

The U.S. stock market has seen many ups and downs as the country battles rising unemployment, increased inflation, high gas prices and the ongoing credit crunch. And as you know, these problems have spilled over into other countries, taking the global markets for a wild ride.

The most recent example of this happened late last week. The U.S. markets sold off sharply in response to a worsening jobs report and record-high oil prices with the Dow dropping almost 400 points last Friday. That marked the S&P's biggest sell-off in four months.

As a result of the huge drop in domestic markets, foreign markets sold off as well, as Hong Kong's Hang Seng index dropped almost 5% and the Shanghai index fell nearly 12% in the past week.

Monetary Tightening in Mainland China

Adding to the decline in Mainland Chinese markets is the monetary tightening that took place in China earlier this week. The reason for the country's fifth consecutive move to raising the reserve requirement comes down to one thing: inflation. The Chinese government is doing everything in their power to tame the country's record high inflation that is now around 8%. So the Chinese central bank raised the reserve requirement by 1.0% from 16.5% to 17.5%.

As you might have guessed, monetary tightening isn't good news for stock markets. It actually limits the amount of money flooding into the stock market, so it's really not surprising that the Mainland markets tumbled this week. And the Chinese government's plans to continue its monetary tightening steps as long as inflation continues to sit at record highs only added to the decline.

You're Invited!

I'd like to invite you to an exclusive online conference on Tuesday, June 24 at 4PM ET. This conference geared to my Asia Edge members, but I wanted you to also be able to hear the important topics I'll be discussing. I'll be covering the important investment themes and trends that I'm seeing right now. And I'll provide my current investment outlook and our top five Asia Edge buys, as well as answer some of your questions, and much more. And it's all FREE! To reserve your spot, simply send an e-mail to rsvp@asiapacificedge.com. If you have any questions that you'd like me to address during the live event, you can include them in your RSVP e-mail. Event details will follow in the coming week. I hope you can join me -- I'm looking forward to talking with you.

It's important to note that the Hong Kong central bank continues to follow the Fed's monetary easing policy – a direct contrast to Mainland China's actions. So with Hong Kong moving in lockstep with the U.S., its actions should continue to support the Hong Kong stock market. Many of the ADRs that I recommend in my China Strategy service are actually linked to their underlying shares on the Hong Kong stock market. To learn which of these ADRs are the best ways to profit in China, join China Strategy today.

Survival Strategy

Although the recent volatility in the markets and in our holdings is difficult to swallow, these ups and downs are something that we have been experiencing for a few months. The last global market sell-off was in mid-March after the sudden collapse of Bear Stearns.

The 72 hours following the event created a wave of panic selling in stock markets around the world, as many investors feared that the U.S. economy would enter a recession. Because of this, stock markets in China and Hong Kong followed suit with the U.S. markets in a downward spiral.

When that happened, I reminded my China Strategy subscribers that our Chinese stocks were still attractive long-term investments. And I even made one of my favorite companies -- China's leading medical device manufacturer -- a top buy right after the Bear Stearns collapse. A great decision -- the stock has moved up 43% since then.

Now even after the decline in Chinese stock markets this week, I still believe that Chinese stocks are good long term investments -- especially those traded in Hong Kong. There's a lot of short-term volatility in Chinese stocks with the upcoming Beijing Olympics and the U.S. troubles. But it's not a time to panic. Anyone that can look past the short-term gyrations and look out to the bigger picture to six to 12 months from now will discover that there are plenty of profits to be made.

In fact, that same medical device manufacturer that I recommended as a top buy back in March is still one of my favorite picks right now – and I'm actually recommending that my China Strategy subscribers load up on it on pullbacks. To learn more about this company and my other recommendations that are on track to pay back 20%, 30% and 50% in the foreseeable future, join China Strategy today!

Robert Hsu