China stocks advanced in Shanghai and Hong Kong universally on Wednesday. The Shanghai Composite rose 29.60 points or 1% to 2,922,30, another record for 2009. The index is up over 60% YTD but is still far from its all time high of over 6,000 in November 2007. The China News Agency reported a major iron ore discovery in China's northern Liaoning province, the largest in Asia. China's largest steel maker Baoshan Iron and Steel Co. (600019.SS: Quote, Profile , Research) rose 3% to Yuan 7.20, Angang Steel (0347.HK: Quote, Profile , Research)(000898.SZ: Quote, Profile , Research) advanced 7.4% followed by Maashan Steel's 2.3% climb. Chinese stell makers are expected to benefit from a local source of iron ore vs. shipments from Australia and Brazil. Besides this discovery, the OECD increased GDP forecast for China to 9.3% from 8.5% earlier this year. The OECD announcement comes after similar upgrades by the World Bank, Standard Chartered and Barclays Capital. Airliners got additional boost from strong passenger growth numbers. China Southern Airlines (600029.SS: Quote, Profile , Research)(1055.HK: Quote, Profile , Research)(ZNH: Quote, Profile , Research), the largest Chinese carrier by fleet size, rose 3.2% following a report by the China Civil Aviation Administration that passenger traffic rose 19% in 2009 vs. same time 2008.
Hong Kong trading was strong as well, the Hang Seng Index <.HSI> 357.78 points or 2.02% to 17,892.15. Stock that advanced outnumbered decliners 39:3. Steel makers, airliners, commodity players, banks were all strong. Only overbought infrastructure stocks took a breath and didn't participate in a broad rally.
China stocks in the U.S. are oversold and are ready to reverse course and rally. It all depends on American stock market sentiment. With no single China stock in an overbought position the upside potential is not limited. Five China stocks are oversold, a big increase from last week. 
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