The Shanghai Composite fell 53.56 points or 1.9%, the most in two months, on concenrs that resuming IPOs will suck up liquidity and slow down the index growth. The Shanghai Composite is up 51 percent this year following a 4 trillion Yuan ($586 bil) Chinese stimulus package. But trading in Hong Kong reflected wider international momentum sending the Hang Seng Idex up 98.65 points or 0.52% to 18,889.68. Basic materials, mining, construction equipment makers pulled the index, Aluminum Corp. of China (NYSE:ACH) advancing 3.5% followed by Guangshen Rail (NYSE:GSH). But power generators fell on high energy prices while telecoms stocks succumbed to profit taking. China Mobile (0941.HK) advanced 14.2% in the last twelve trading sessions and was ready to take a breath.
Looking at Chinese stocks listed in America, oil stocks led a rally on Thursday. All four oil and petrochemical stocks made it to the top five China ADRs. Baidu.com (BIDU) managed to close above $300 again, but Shanda Interactive (SNDA) and other hot NASDAQ lising fell.
Following a strong day on Thursday, China ADRs are up 37.9% YTD and pared losses for the 52 week period. Th upside is that economic indicators suggest China is on the way to recovery but investors point out to the 51% rally in the Shanghai Composite and are cautious if there is more to the upside. Looking at China ADRs from a technical point of view a short term correction is a possibility. While the relative strength indicator is not out of balance yet, the number of overbought Chinese stocks is increasing.