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Three China Funds on Top This Week

Three funds specializing in Chinese companies beat all geographically focused funds this week.

While bank failures have occurred in the U.S., the Bank of China posted a 42.8% gain in first-half profit. And the growth received criticism because it was the only one of 14 publicly traded Chinese banks that saw profits rise below 50%.

Unlike the 2004 Olympics in Athens, in which Greece, the host nation, is still paying off the accumulated debt, the 2008 Beijing games were easily absorbed by China's economy, which is estimated by JPMorgan to reach $4.5 trillion in 2008.

Over the last five years, China spent about 1% of its total fixed-asset-investments budget to build Olympic venues. And on top of this, China increased railroad network funding to sustain economic growth, helping China Railway Group's six-month profit to rise 37% from the same period a year earlier.

The top three funds for the week ended Thursday, Aug. 28, were JF China Region Fund (JFC), up 8.9%; Direxion China Bull 2X Fund (DXHLX), up 8.8%; and Greater China Fund (GCH), up almost 8%.

All three funds benefited from the 11.8% jump in CNOOC (CEO), China's largest offshore oil driller, and the 10.3% spike in Ping An Insurance Group of China (PIAIF).

CNOOC reported $4.03 billion in first-half profit, up 89.2% from a year earlier. Ping An is recapitalizing its life insurance unit to continue playing in a life insurance market that's growing at a 66.7% annual rate.

Best-Performing Geographically Focused Funds for the Week Ending Thursday, Aug. 28
Fund Ticker Rating Fund Type 1 Week Total Return
JF China Region Fund Inc JFC B- Closed-End 8.89%
Direxion China Bull 2X Fund DXHLX U Open-End 8.83%
Greater China Fund Inc/The GCH C- Closed-End 7.96%
New Germany Fund Inc/The GF B Closed-End 4.96%
Guinness Atkinson Funds - China & Hong Kong Fund ICHKX C+ Open-End 4.80%
Japan Smaller Capitalization Fund Inc JOF D- Closed-End 4.38%
iShares FTSE/Xinhua China 25 Index Fund FXI C+ ETF 4.35%
iShares FTSE China HK Listed Index Fund FCHI U ETF 4.35%
SPDR S&P China ETF GXC E- ETF 4.27%
Taiwan Fund Inc/The TWN C- Closed-End 4.26%
Source: Bloomberg & TheStreet.com Ratings

The worst-performing fund this week is the Direxion China Bear 2X Fund (DXHSX), down 9.2%. This is the inverse fund of the second-best performer and targets a 200% opposite return from the FTSE/Xinhua China 25 Index. Since its inception on Dec. 4, 2007, the bear fund has had the upper hand. But the tide may have turned.

In economic releases this week, year-over-year household spending in Japan in July fell 0.5%, on top of a drop of 1.8% in June. More than 15% of the Japan Smaller Companies Fund (JSCFX) is tied up in retail stocks, along with 29.9% invested in real estate and 26.7% in real estate investment trusts.

In addition, 13.3% of the fund is in cash holdings of yen. As the U.S. dollar strengthened against the yen this week, the dollar value of yen holdings fell. The fund lost 7.6%, making it the second-worst performer.

Down 5.4% for the five trading days under review, The Korea Fund (KF) was the third-worst performer. The fund has large holdings of Samsung Electronics (SSNLF), Posco (PKX) and Hyundai Heavy Industries.

Worst-Performing Geographically Focused Funds for the Week Ending Thursday, Aug. 28
Fund Ticker Rating Fund Type 1 Week Total Return
Direxion China Bear 2X Fund DXHSX U Open-End -9.21%
Japan Smaller Companies Fund JSCFX E- Open-End -7.55%
Korea Fund Inc/The KF D Closed-End -5.41%
Direxion India Bull 2X Fund DXILX U Open-End -5.18%
iShares MSCI South Korea Index Fund EWY B ETF -5.07%
Market Vectors - Gulf States ETF MES U ETF -4.78%
NETS PSI 20 Index Fund LIS U ETF -4.28%
Profunds Ultra Short China ProFund UHPIX U Open-End -4.10%
World Funds Inc - Third Millennium Russia Fund TMRFX B- Open-End -4.04%
Market Vectors Russia ETF RSX D- ETF -3.98%
Source: Bloomberg & TheStreet.com Ratings

For an explanation of our ratings, click here.

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Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.

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