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China ADR Wrap June 21, 2010

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decline_9 June 21, 2010 (Chinavestor) It was another interesting day for stock investors world wide. News that China will let its current appreciate against the dollar spurred investors' optimism in Asia, sending the Shanghai Composite Index  (SHA:000001) 2.8 percent higher for the day while the Hang Seng Index (INDEXHANGSENG:.HSI) advanced 3.0 percent. European and U.S. exchanges opened higher but much of the optimism eroded by the end of the day in the U.S., prompting the DJIA to surrender all early morning gains. Alcoa Inc. (NYSE:AA) was the best performing component of the DJIA as commodity and energy prices rose. Aluminum Corp. of China (NYSE:ACH), the third largest aluminum maker of the world, ended the day 4.0 percent higher. China Unicom (NYSE:CHU) rose 6.4 percent while Yanzhou Coal (NYSE:YZC) advanced 4.24 percent. Chinese airliners were on fire; China Eastern Airlines (NYSE:CEA) and China Southern Airlines (NYSE:ZNH) surged 5.5 percent and 5.4 percent, respectively.

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Chinese stocks rose in Asia, each and every component of the 42 member Hang Seng Index (INDEXHANGSENG:.HSI) advanced. But Chinese stocks performed mixed in the U.S. - large caps advanced but smaller cap stocks lagged. The iShares FTSE/Xinhua 25 China Index (NYSE:FXI), tracking the largest 25 publicly traded Chinese companies in Hong Kong, rose 3.5% for the day. Small cap proxy Claymore/AlphaShares China Small Cap ETF (NYSE:HAO) gave up most of early morning gains ending the day 2.3% higher.

China Unicom (NYSE:CHU), the second largest Chinese mobile carrier, jumped 9.1% in Hong Kong and rose 6.4% in New York following May operational statistics revealing that 3G growth outstripped 2G growth for the first time.

Besides energy companies, Chinese airliners gave boost to the Shares FTSE/Xinhua 25 China Index (NYSE:FXI). Airliners have been returning to profitability world wide and with a stronger yuan, disposable income for ordinary Chinese is on the rise, suggesting more leisure and business travel is likely to follow. China Eastern Airlines (NYSE:CEA), the second largest Chinese carrier after swallowing Shanghai Airlines earlier in 2010, rose 5.6% followed by China Southern Airlines (NYSE:ZNH).

Petrochina Co. Ltd. (NYSE:PTR), a Hang Seng Index (INDEXHANGSENG:.HSI) heavy weight, rose 2.04 percent for the day.

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Small cap stocks remained volatile. UTStarcom (NASDAQ:UTSI) announced a strategic partnership with China Merchants Bank (HKG:3968), sending its shares 15.8 percent higher by the close. Online gamers outperformed as well - NetEase.com (NASDAQ:NTES) rose 9.8 percent followed by the9 Ltd. (NASDAQ:NCTY). Perfect World (NASDAQ:PWRD) surrendered some of its early morning gains but closed 5.01 percent higher for the day.

The yuan appreciation boosts the top and bottom line of Chinese companies conducting business within China - something online game operators and developers are beneficiaries of. More about the currency relaxation and its implications: Why the Yuan is so important!

Ctrip.com (NASDAQ:CTRP), another travel company, rose 7.6% for the day as online travel bookings and packaged tours are expected  to rise on the wake of the stronger yuan.

Less fortunate China Precision Steel, Inc (NASDAQ:CPSL), Silvercorp Metals (NYSE:SVM) and WuXi Pharmatech (NYSE:WX) fell six percent for the day. Their weak performance took a toll on the Claymore/AlphaShares China Small Cap ETF (NYSE:HAO) on Monday.



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