Chinese shares are expected to open lower on Wall Street on Monday as index futures point to a lower open. Leaders at the G8 Summit held in Lecce, Italy, are signalling that stimulus spending will have to wind down following signs that the global economy is recovering. These and other dollar related comments from Russian Finance Minister Alexei Kudrin sent the greenback to rally. Stronger dollar sent commodity prices falling, dragging down commodity stocks world wide. Asian and European indices are down considerably setting a somber tone for New York ahead the bell.
But trading in Shanghai resumed with an upbeat sentiment following news that the Chinese government is not done with stimulus yet. Plenty of liquidity continued to dominate equity markets in Shanghai and Shenzhen, propelling the Shanghai Composite Index <.SSEC> 1.7% to 2,789.55 points. The rally was broad with banks and retailers taking a lead.
But Hong Kong trailed world wide indices lower. The Hang Seng Index <.HSI> dropped 390.72 points or 2.07% to 18,498.96 points. Oil, telecom, transportation, and basic materials all fell. Aluminum Corp. of China Ltd. (2600.HK: Quote, Profile, Research)(ACH: Quote, Profile, Research)(601600.SS: Quote, Profile, Research) fell 4.5% while Shanghai Petrochemical (0338.HK: Quote, Profile , Research)(SHI: Quote, Profile , Research) (600688.SS: Quote, Profile , Research) fell 5.2%. Decliners outnumbered stocks that advanced by 37 to 6 among Hang Seng Index components.
There is continued institutional interest in Yanzhou Coal H shares. But that is unlikely to offset negative sentiment for commodities for Monday. With Chinese ADRs on a relatively strong positionf from a technical point of view, a correcdtion is likely for today.