(Aug. 21, 2009 - Chinavestor) Shares of Chinese companies continued to advance in Shanghai but came off in Hong Kong on Friday. The Shanghai Composite Index advanced 49.19 points or 1.69% to 2,960 on the back of better then expected profits from the nation's largest financial institution, Industrial and Commercial Bank of China (SHA:601398). The bank reported net profits to reach Yuan 31.3 billion ($4.6 billion) on record credit growth and low bad loan provisions. Shares of the index heavy weight advanced 2.3% on Friday. But the health of the Chinese financial system is under scrutiny following loose lending practices as part of the Yuan 4 trillion ($586 billion) stimulus package unveiled in last November. But so far earnings of major banks have shown strong profits. The nation's second largest bank, China Construction Bank (SHA:601939), reported net profit increase of 11.7% today.
Trading in Hong Kong was dominated by profit taking. The Hang Seng index jumped 374.63 points yesterday giving leery investors a chance to take money off the table. Despite a loss of 129.84 points on Friday the index is up 244.79 points or 1.23% Thursday and Friday combined. Shanghai Petrochemical (HKG:0338) (NYSE:SHI) H-shares advanced 2.26% but most of the forty for member Hang Seng index component fell.
Looking at U.S. listed Chinese stocks one thing is for sure: market sentiment will dominate China stock trading. Ben Bernanke, FED Chairman, will give account of the latest housing data and the overall health of the economy today giving direction for The Street. Chinese ADRs are set to rally from a technical point of view. With a big correction behind, China stocks are ready to resume creeping higher.
Looking at Chinese indices and their trailing ETFs from an overbought/oversold point of view, the direction is uncertain.