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China Stocks Slide

Beijing -- Following the recent U.S. downtrend, the Hang Seng Index fell again Tuesday, closing off 1% to 15,609. The Shanghai Composite Index managed to add 0.4% to 1592.

In New York trading Monday, China names slid along with the broader averages. Baidu (BIDU) was off 4.8% to $78.75, while 51Job (JOBS) was off 7.6% to $20.05. Ctrip (CTRP) edged down 0.1% to $49.03 and eLong (LONG) closed down 1.2% to $14.01.

Despite Monday's slip, online travel site Ctrip has stayed remarkably insulated from the recent global equities selloff, a resiliency that could be attributed to its market leadership in a major growth business: tourism in China. Since May 10, Ctrip's shares have surrendered a mere 1.9% in value. Compare that to a loss of 9.1% for the Nasdaq, 6% for the Dow Jones Industrial Average, and 9% for its smaller rival, eLong. Even accounting for the slight decline, Ctrip is still up a whopping 70% year to date.

For obvious reasons having to do with valuation, that doesn't mean it's a great time to load up on shares. But it's certainly a stock worth watching.

Investors could think of Ctrip as a neat play on China's steadily-expanding middle class, and the strength of this trend would not shock anybody who's spent time in a Chinese tourist hotspot like Lijiang and gazed on scenic canals cheek to jowl with seemingly the entire national population. If you haven't had that particular experience, trust that domestic tourism is a huge industry, and getting bigger every year.

According to China's own government tourist office, domestic tourism receipts rose 12% in 2005 to $66 billion. Much of that travel occurs during government-mandated week-long holidays in May and October that are intended to spur domestic spending, and of course at Chinese New Year, when urban Chinese head back to their family homes in the countryside. But an increasing number of middle-class urbanites now take vacation days on their own schedule, often in the summer.

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