Two Asian newspapers revealed that China’s fight against inflation could pay off in the immediate future. If so, the SSE Composite Index (Shanghai: 000001.SS) Shanghai is the place for you to be.

Both The Shanghai Daily and The Standard reported that as early as this week the Chinese government could issue new numbers to show it has finally reined in inflation. The news could send the Shanghai Composite Index back up. In fact, in our June 11 issue, we thought it was a good idea to double down on the index while it was still in a trough.

The Asian newspapers quoted the Industrial and Commercial Bank of China as saying that the country’s inflation could peak in 2009 and then decline.

While the bank also predicted that stock markets could continue to suffer through 2011, our guess is that any government reporting good inflation numbers has got to be considered a superstar.

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For the first time since we’ve compiled our index, we’ve experienced a loss. Not too bad really, given the insanity of markets everywhere.Inflation is wreaking havoc this week, ripping through emerging markets like a typhoon. Hopefully by next week, we’ll have clear skies.

Key
ALL ORDINARIES IDX (ASX: ^AORD) Australia
BSE SENSEX (Bombay: ^BSESN) India
IBOVESPA SAO PAULO (^BVSP) Brazil
EGYPT CMA GENL INDX (Cairo: ^CCSI) Egypt
HANG SENG INDEX (HKSE: ^HSI) Hong Kong
COMPOSITE INDEX (Jakarta: ^JKSE) Jakarta
COMPOSITE INDEX (Kuala Lumpur: ^KLSE) Kuala Lumpar
KOSPI Composite Index (KSE: ^KS11) South Korea
MERVAL BUENOS AIRES (Buenos Aires: ^MERV) Argentina
IPC (Mexico: ^MXX) Mexico
NZX 50 INDEX GROSS (NZSE: ^NZ50) New Zealand
IGBM (Madrid: ^SMSI) Spain
TEL-AV TASE-100 IND (^TA100) Israel
TSEC weighted index (Taiwan: ^TWII) Taiwan
SSE Composite Index (Shanghai: 000001.SS) Shanghai
iShares MSCI South Africa Index (EZA) South Africa
RTSI INDEX (RUS: RTS.RS) Russia
ISHARES MSCI THAILAN (NYSEArca: THD) Thailand
iShares MSCI Turkey Invest Mkt Index (TUR) Turkey

Our biggest winner this week is the Shangahi SSE Composite Index. We had written about it in the June 11 issue, suggesting it was time to perhaps double down. Even though it was our biggest winner, we missed the mark. It dipped 7.6% since that article.

Hold tight. Keep the faith. Our first loss is always a bruiser. Have a great weekend.

–Irwin Greenstein

Roller-coaster ride is a good way to describe the Shangahi SSE Composite Index.

If you were in it a year ago and rode it up for an exhilarating six months you would’ve gained 61.5%. That’s darn good when you compare it with the Dow Jones Industrial Average, NASDAQ and the S&P 500 which were pretty much flat.

(000001.SS = SSE Composite Index; ^IXIC = NASDAQ; ^DJI = Dow Jones Industrial Average; ^GSPC = S&P 500)

As you can see, the next six months would have wreaked havoc on your stomach. The plunge in the SSE Composite Index reached 39.9%. After the nausea faded you could still say, “Well, OK, but I’m still up more than 40%” and that’s a great way of looking at it. But what if you jumped in during November and rode it down?

What has fueled this roller-coaster ride in the SSE Composite Index? It’s called the “inflation contagion.”

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