GOD bless America! Thank you to the United States for bringing us back to the lucky 13,000 mark last week. A building cash hoard in US fund managers' cupboards coupled with some 'low inflation' numbers set Wall Street alight. The yield on the omnipresent 30-year bond went below the 7 per cent level, stimulating major secretions of that buy-equities hormone in investors worldwide. Investors in Hong Kong were not immune and caused the market to run up over 400 points last week. The red chips took a breather and suddenly Hong Kong's other market, the blue chips, got a life. Not surprisingly the backbone of the index, the property and banking sectors, rallied. While the investors' siren from the US market has resonated nicely for the territory's investors, another song from the US, this one discordant, may soon be heard here. Sino-US relations are very much at the front of our minds these days as various aspects of the relationship are looking shaky. China bashing is fashionable again in the US. Hong Kong is in that familiar position of being between the proverbial rock and a hard place. China's entry to the World Trade Organisation, US attitudes to Taiwan, the shift of attention from Japan to China in the eyes of the US as the trade deficit 'bad guys' and the old favourite Most Favoured Nation renewal are all bubbling just beneath the surface. While the market is currently all wine and roses, investors' blinkers could come off in a hurry when one or more of these issues affect local sentiment. There were results galore from the China side of our market last week as many red chips and H-share companies finished punching the calculators. In the red-chip sector most results were seen as positive, which is not surprising as investors are viewing the whole sector with rose-tinted spectacles. We were not impressed with portfolio member China Overseas' results and have decided to sell our holdings today. We had hoped to see a larger contribution or at least a potential for it from its infrastructure business. While its land bank in China and Hong Kong is attractive and cheap, we would like to see its businesses outside the property sector developing better. Portfolio member Guangdong Investment also announced its results. They too were ordinary at best, suggesting that its share price is fairly valued today. We will not dispose of this counter yet as we expect some handover fireworks for this share in the weeks ahead. The H shares reported, as expected, some disastrous results but their price has gone up. Improving prospects for some companies and general excitement about China has aided this sector. Now that the results are out we are prepared to dip our toe in the H-share waters. For our portfolio we like Nanjing Panda, which recently posted encouraging results and has one of the cheapest price earnings ratios for an H share. A bullish investor might want to look at well-traded Maanshan Iron, which has rebounded off a low and can be viewed as a geared warrant on the H-share index as a whole. Finally we add shares of another red chip, computer company Founder. This firm is a world leader in supplying Chinese-character publishing systems. It is particularly active in supplying systems to mainland TV stations, many of which are still 'under-computerised'. This red chip is a bit different from the rest and worthy of attention. It is supported by good earnings growth and the company enjoys a special niche in the market.