Chinese stocks fell in Shanghai second day in a row, but trading in Hong Kong was strong where the Hang Seng Index jumped over 400 points. Trading in Shanghai was goofed by speculations that the government will tight lending in order to avid a stock bubble to build. The Shanghai Composite fell 72.17 points or 2.11% to 3,356.33. But trading in Hong Kong sent the Hang Seng Index up 404.47 points or 1.9% to 20,899.24. Chinese telecom players lead the rally, followed by oil companies and resource plays.
Index futures point to a higher open for the DJIA, suggesting a bullish day for Chinese stocks. If Hong Kong can serve as a barometer, expect China Mobile (NYSE:CHL), Sinopec (NYSE:SNP), Petrochina (NYSE:PTR), Huaneng Power (NYSE:HNP) and Aluminum Corp. of China (NYSE:ACH) to do well on Thursday. Looking at NASDAQ listed China stocks, Baidu.com (BIDU) and Focus Media (FMCN) are the best positioned to take advantage of a bullish market day.
Despite a recent jump in the Hang Seng, its trailing ETF, the ishanre FTSE/Xinhua 25 Index (NYSE:FXI) is not overbought and has upside potential.