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Oil, money flows drive large cap China stocks higher

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oil_barrel1 March 29, 2010 (Chinavestor) The dollar fell as the euro regained some of her strength as Greece's ills subdued. Weaker dollar pushed commodity and oil prices higher, helping energy stocks on Monday. Volatility returned to smaller cap China stocks but money flows ruled helping large cap China plays to outperform smaller counterparts. The FXI measuring the performance of the largest 25 China stocks advanced +1.9% while the Claymore/AlphaShares China Small Cap ETF rose a modest 1.7% for the day.

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Strong money flows in Shanghai helped large cap stocks in general and China Life Insurance (NYSE:LFC) in particular to gain +1.55%. Shares of China's offshore oil specialist, CNOOC Ltd. (NYSE:CEO), advanced +2.18% before 2009 Annual Report later this week. Petrochina (NYSE:PTR), the largest Chinese oil producer, advanced +2.22% but Sinopec (NYSE:SNP), Asia's largest refiner fell -0.58% as refining margins worsened on higher oil price. Shares of coal miners advanced in Asia and on the NYSE as price of coal and oil rose sharply. Chinese solar makers enjoyed a double whammy - increasing oil price and a major analyst upgrade last week. Shares of Baidu.com (NASDAQ:BIDU), the largest Chinese NASDAQ listed stock by market cap, closed back above $600 for the second time in history.

Shares of E-House Holdings (NYSE:EJ) and WuXi Phamratech (NYSE:WX) fell along with American Oriental (NYSE:AOB)and Fuqi International (NASDAQ:FUQI).

 

While smaller cap stocks moved, measured in percentage points, money flows lifted large cap stocks more on average. For a list of volatile stocks, read Volatility is back of China stocks on Monday.

Stocks on the move included Baidu.com (NASDAQ:BIDU), a company with a market cap of over $20 billion! With Google's exit from the Chinese search market, Baidu is expected to grab most of Google's firmer turf. BIDU already commences over 63% of the search market and is expected to raise that share to over 90%. Couple of analysts predict BIDU can go up to $670 or more - and they might be right. BIDU has been delivering constant revenue and earnings growth - now with a sweetened outlook., Chart was made BEFORE Google announced plans to pull out of China.

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Chinese oil companies advanced the second most in dollar terms as price of oil rose. CNOOC Ltd. (NYSE:CEO) advanced +$3.55 followed by Petrochina (NYSE:PTR). China's top oil producer, Petrochina (NYSE:PTR) reported last week a slight decline in oil production in 2009 but lower oil prices dented into profits. Petrochina 2009 net down on lower oil price.

CNOOC Ltd. (NYSE:CEO) is scheduled to report later this week - the only Chinese oil major not publishing 2009 annual report yet. Sinopec (NYSE:SNP), Asia's largest refiner, reported before the open today - a slight increase in oil production and a +6.7% in refining activity for 2009 - but net income jumped as margins improved thanks to lower oil prices. Sinopec 2009 net jumps on lower oil price.

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Shares of Trina Solar (NYSE:TSL) advanced +$1.63 or +6.94% on Monday following an analyst upgrade last week and firm oil prices. Conventional wisdom hold that solar makers make money when price of oil is above $60/barrel. The more expensive the oil the more economic sense solar makes... Besides Trina Solar (NYSE:TSL), smaller cap Solarfun Power (NASDAQA:SOLF), JA Solar (NASDAQ:JASO) all advanced significantly.

China Life Insurance (NYSE:LFC) advanced +$1.09 on strong money flows. Chinese insurers derive approximately 15% of their net income from investment , tied to the performance of the Shanghai Composite Index (SHA:000001). Excuberant investor behavior in Shanghai translates to gains in the share price of China Life (NYSE:LFC).

Price of coal is tied to the price of oil in China, so when price of oil is on the rise Chinese coal miners are more profitable. China Shenhua (HKLG:1088), the largest Chinese coal miner, and Yaznhou Coal (HKG:1171) advanced over +3% in Hong Kong this morning foretelling a similar move on the NYSE today.

Shares of WuXi Pharmatech (NYSE:WX) have come off March 15 lows but seem to hit a resistance level at $15.5. The Company reported worse-than-expected earlier the month but became oversold and made a correction lately. But that correction has lost steam today with no indication where the stock is going to go from here. WuXi Pharma lacks growth, promises more.

Investors don't seem to believe the great report of E-House Holdings (NYSE:EJ). The company reported a record quarter and year, jumped big on the news but failed to gain traction and fell back. Nevertheless EJ looks like a great value play - but patience is a virtue... Banner year for EJ with cash dividend.

 



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