Chinese stocks listed on American stock exchanges are set top start the week lower following weak international market sentiment. American index futures point to a lower open while China stocks have become expensive following weeks of rallies. Trading ended on a high note last Friday with NASDAQ listed China ADR benchmark Baidu.com (BIDU) breaking through $300 for the first time in 2009. Home Inns & Hotel Mgmt. (HMIN) advanced $1.65 or 9.89% on Friday extending the rally for over 30% since Ctrip.com (CTRP) announced purchasing a controlling stake in HMIN. But Shanda Interactive (SNDA), the largest online game developer and operator, succumbed to profit taking and shed $1.10 to $62.26. Sinopec Shanghia Petchem (SHI) and parent Sinopec Corp (SNP) fell on strong oil as investors dump refiners on squeezed profits.
Looking ahead, Hong Kong trading was muted on earnings prospects. The Hang Seng Index rose over 20% on May and investos stated to excercise caution. Shares of HSBC Plc (HBC), an index heavy weight, fell 2.7% following news that banks will have to make up for some of the losses incured from the Madoff scandal. CNOOC Ltd (CEO) fell as oil retreated from $70/barrel an on earnings concerns.
Looking at Chinese stocks listed on the NYSE and NASDAQ, there are some notable changes from last week. Twelve China ADRs are overbought versus just one in last week. With China ADRs up 34.2% YTD, investors are getting cautious putting pressure on China stocks both in HK and the U.S. Even the relative strength index (RSI) on the bottom of the report suggests a pullback is imminent. So just be careful and selective today!