The Shanghai Composite Index <.SSEC> rose 52.10 or 1.7% on Thursday to 3,065.25 thanks to signs that China is on the way to recovery. The index just broke through 3,000 points on Wednesday and many questioned if the time has come to take a break but apparently Chinese investors continued to step up buying large cap blue chips. Petrochina (PTR) A shares rose 3.3% while China Shenhua Energy (1088.HK: Quote, Profile , Research)(601088.SS: Quote, Profile , Research), the largest coal miner in China, advanced 4.3%. Strong money flows continue to dominate China's domestic market.
But trading in Hong Kong was remarkably different. The Hang Seng Index <.HSI> fell 200.68 points or 1.09% to 18,178.05. China Southern Airlines (600029.SS: Quote, Profile , Research)(1055.HK: Quote, Profile , Research)(ZNH: Quote, Profile , Research) fell 4.7% followed closely by China Telecom (CHA: Quote, Profile, Research) (0728.HK: Quote, Profile , Research). China Shenhua H-shares fell 0.7% in Hong Kong just the opposite of Shanghai's strong advance. But shares of Huaneng Power International (0902.HK: Quote, Profile , Research) (600011.SS: Quote, Profile , Research) (HNP: Quote, Profile , Research) rose 2.9% on anticipation of that an electricity price increase will follow latest gasoline price jump of 10% as of July 1st.
Looking ahead index futures point to a lower open ahead the bell on Thursday. The market is anxious about upcoming key payroll report sending DJIA futures 56 points lower. This will pressure Chinese stocks from exploiting their potential in early morning trade. But American listed China stocks or ADRS look good from a technical point of view. The number of China ADRs trading above 50-DMA is increasing yet there is more oversold China stocks than in last week. Number of overbought China stock is only one, a very low number. While China stocks show short term momentum, measured by 20-DMA on the bottom of the chart below, the relative strength indicator (RSI) is still in the low 40s, indicating more upside potential on the mid term.