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List of China stocks to avoid when oil falls

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oil_barrel1Price of oil have fallen since Wednesday following news that inventories rose more than expected in the U.S. ahead of the summer peak season. Price of oil fell below $70 for the first time in four days while gasoline futures fell 6 cents to 2.0111/gallon.

When looking at China ADRs today, eight out of ten stocks that fell the most are oil related. As the following table suggests one hour before the market close Chinese offshore oil producer CNOOC Ltd. (HKG:0883) (NYSE:CEO) is the hardest hit on Wednesday, followed by PetroChina (HKG:0857)(NYSE:PTR)(SHA:601857). Sinopec Corp (HKG:0386)(NYSE:SNP) (SHA:600028) and Shanghai Petrochemical (HKG:0338)(NYSE:SHI) (SHA:600688) are on the list as well, comleting the Chinese ADR oil list.

Solar companies are falling along the price of oil. Trina Solar (NYSE:TSL), LDK Solar Co. Ltd. NYSE:(LDK), Suntech Power Holdings Co. Ltd. (NYSE:STP) and China Sunergy Co. (NASDAQ:CSUN) made it to the list as well. It is well known that Chinese solar manufacturers turn profitable when price of oil is above $60/barrel but it is great to see how sensitive they are to oil price fluctuations.

Hotel Inns and FUQI International are on the list due to other reasons than oil.

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In essence, keep in mind that these companies are good when price of oil goes up but can hurt you when oil heads south.



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