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China stocks up in Asia, but outlook is bleak for ADRs on Monday

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pre-622-tumbChinese stocks rallied in Shanghai and Hong Kong on Monday but index futures point to a lower open on Wall Street. The Shanghai Composite Index <.SSEC> rose for the fourth straight day to 2,896.30, a new record for 2009. Banks and insurance companies led the rally after Chinese Premier Wen Jiabao pledged to keep lending loose to help stimulate the economy. Statistics show that infrastructure related activity picked up considerably since the announcement of the Yuan 4 trillion ($586 billion) stimulus package last November.

(SeeĀ Strong economic news back China stocks.) Optimism from Shanghai carried over to Hong Kong sending the Hang Seng Index <.HSI> up 138.62 points or 0.77% to 18,059.55. H-shares fo Aluminum Corp. of China Ltd. (2600.HK: Quote, Profile, Research)(ACH: Quote, Profile, Research)(601600.SS: Quote, Profile, Research) rose 2.2% followed by similar advances in Guangshen Railway Co. Ltd. (GSH: Quote, Profile , Research)(0525.HK: Quote, Profile , Research)(601333.SS: Quote, Profile , Research) and China Telecom (CHA: Quote, Profile, Research) (0728.HK: Quote, Profile , Research) shares. Almost three stocks advanced for each that fell on the Hang Seng Index.

But the outlook for Chinese ADRs is dim for Monday morning. Not only did they suffer heavily last week, index futures point to a weak open. China stocks lost momentum universally, only one ADR is considered overbought, Hurray Holdings (HRAY), compared to twelve just a week ago. Number of oversold ADRs rose to six from three last week. Even the hardly volatile relative strength indicator (RSI) shows extreme drop in value from last week. But this in turn is suggesting that the bottom for China stocks may come sooner than later.

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