(Sept. 1, 2009 - Chinavestor) Shares of Chinese companies bounced back off in Shanghai and Hong Kong after heavy selling in August. The Shanghai Composite Index advanced 15.98 points or 0.60% to 2,683.72 by the end on Tuesday, still off 20% from its peak earlier in August. Weak corporate earnings and careful remarks about the Chinese economy by prominent policy makers are partially to blame for such a correction.
The Hang Seng Index in Hong Kong reflected international market sentiment and rose 148.11 points or 0.75% to 19,872.30. Bargain hunters snapped up assets of oversold Chinese large cap companies. Aluminum Corp. of China (HKG:2600) rose 1.6% followed by a 1.2% advance of Petrochina (HKG:0857). China Telecom (HKG:0728) advanced 2.0% on competitors' weakness.
Chinese shares listed on American stock exchanges have lost all short term momentum. there is not a single Chinese ADR that is overbought- except for American Exchange listed small cap Sinovac. The number of oversold Chinese ADRs is on the rise, creating opportunities for the seasoned investor.
Looking at Chinese indices and their trailing ETFs, the Shanghai composite index is clearly oversold and so is its trailing ETF, the Morgan Stanley china (NYSE:CAF). But fundamental weakness might keep both at bay, limiting short term upside potential.