Shares of Chinese companies listed in the U.S. outperformed American benchmarks following blockbuster economic news from China. Inflation fell while property sales increased, suggesting that the third largest economy in the world is on a way to recovery. Oversold Chinese solar manufacturer LDK Solar (LDK) advanced $2.47 or 21.65% to $13.90 with huge volume, suggesting brighter days ahead for the whole sector. LDK is the second largest Chinese solar company by market cap and based on preliminary calculations, solar companies make money when oil is above $60/barrel. Besides solar stocks, oil companies advanced on Wednesday but NASDAQ listings performed poorly. Baidu.com (BIDU) closed below $300 on profit taking while Shanda Interactive (SNDA), the largest Chinese online game developer and operator, shed 0.54%.
Looking ahead, Chinese ADRs are expected to follow American market sentiment for the day. Momentum was absent in China on Thursday where the Hang Seng Index eked out a 0.03% gain but the Shanghai Composite fell 18.93 point or 0.7% to 2,797.32 points. Traders in Shanghai suggest that the halt in the index is temporary and was due to profit taking. Liquidity remains strong in Shanghai a sign that the index has more upside potential. According to the National Bureau of Statistics, urban fixed asset investment jumped 23.9% in the first five months of 2009. Chinese stocks did better in Hong Kong but rising interest rates in the U.S. translate to interest rates in Hong Kong where property developers felt the pinch.
Based on technical measures, Chinese ADRs are just as they were a week ago. They are slightly overbought but not terribly, leaving room for improvement. With index futures pointing to a higher open, China stocks are expected to do the same.