Shares of Chinese companies listed on American stock exchanges are looking for direction ahead the bell. The good news is that the Shanghai Composite rose 19.55 or 0.7% to 2,787.89, a 10 months high on strong domestic activity. Car sales jumped 47% in May on generous government incentives and tax cuts that now is extended to TVs and PCs. According to the China Association of Automobile Manufacturers car sales increased to 829,100 in May, more than in the U.S. And while exports fell for the seventh month, consumption and urban fixed asset investment picked up considerably keeping the world's third largest economy on track.
But trading in Hong Kong reflected international market sentiment. The Hang Seng Index fell 194.9 points or 1.07% to 18,058.49. Shenzhen Expressway Co. 0548.HK advanced 2.3% following news that urban fixed asset investment grew 31% in the first five month and China laid down 445 kilometers of highways since the stimulus package of RMB$ billion was announced last November. Defensive China stocks held up well, China Mobile eked out a 0.1% gain while China Unicom rose 0.5%.
But basic materials and commodities fell on profit taking and on fears that stock prices run ahead of earnings. Jiangxi Copper, Yanzhou Coal, Angang Steel all fell heavily in Hong Kong.
Looking at index futures doesn't give us much clout where markets are going to head today. While S&P Futures stand at -1.90 NASDAQ futures are up +1.00. However there are two Chinese ADRs that look interesting from yesterday. LDK Solar (LDK), the second largest Chinese solar manufacturer, advanced 16.33% on Monday with huge underlying volume, suggesting the rally is not done yet. Another stock that has potential for the day is Semiconductor Manufacturing (SMI), a stock that jumped 10.45% with heavy volume.
Chinese ADRs are getting vulnerable from a technical point of view. While they have maintained strong momentum the relative strength indicator (RSI) is well over the neutral phase, rising concerns. Another indicator that sets the alarm off is that 14 Chinese ADRs are overbought, an increase from last week.