June 29, 2011 (Chinavestor) Investors in China turned cautious ahead of Greece's vote on austerity measures, sending key regional indices lower for the day. The Hang Seng Index (INDEXHANGSENG:.HSI) gave back all morning gains to end the day 0.6 points or 0.0% lower. The Shanghai Composite Index (SHA:000001) fell 30.7 points or 1.1% for the day.
Warren Buffett backed Chinese electric car maker, BYD Company (HKG:1211) fell 4.6%, the most among components of the 42 member Hang Seng Index (INDEXHANGSENG:.HSI), as profits fell 84%. China Southern Airline (HKG:1055), the largest Chinese airliner by fleet size, fell 3.0% after crude futures rose sharply. But oil producer CNOOC Ltd. (HKG:0883) rose 1.5%. China Telecom (HKG:0728), the largest fixed line operator in China, advanced 2.2% outperforming the rest of the sector.
In contrast to Hong Kong, Shanghai experienced a broad sell-off. Stocks that fell outnumbered those that advanced five to one among the 50 largest components of the Shanghai Composite Index (SHA:000001). Overbought resource players fell hard as investors fear slump in demand will hurt earnings growth. Aluminum Corp. of China (SHA:601600) and Western Mining (SHA:601168) fell 2.9% and 2.2%, respectively. Financial institutions felt a pinch as well. Three out of the worst five large cap stocks of the Shanghai Composite Index (SHA:000001) came from the sector.
Chinese ETFs enjoyed a broad rally on Tuesday but an extension of such advance is in doubt. Only 9 components of the 25 member iShares FTSE/Xinhua China 25 Index (NYSE:FXI) advanced while the rest fell. But sentiment for small caps was different in Asia this morning. Stocks that advanced outnumbered those that fell two to one among components of the Guggenheim China Small Cap ETF (NYSE:HAO).
If components of the Hang Seng Index (INDEXHANGSENG:.HSI) were a proxy for ADR trading, outlook is best for China Telecom (NYSE:CHA), China Unicom (NYSE:CHU) and CNOOC Ltd. (NYSE:CEO), but China Southern Airlines (NYSE:ZNH) and China Life Insurance (NYSE:LFC) are expected to gap down.