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China stocks mixed in Asia but index futures spell trouble ahead

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economyOct. 28, 2009 (Chinavestor) Shares of Chinese companies rose in Shanghai but fell hard in Hong Kong following dim consumer confidence reading from the U.S. Major American indices fell on renewed worries about the size of the economic recovery.

The Shanghai Composite made a complete mid-day reversal falling 60 points by noon but ending the day up 9.87points or 0.33% at 3,031.33 points. Index heavy weight Petrochina (SHA:601857) (NYSE:PTR) missed earnings forecast but ended the day virtually unchanged. Bank of Communications (SHA:601328) beat earnings on record credit growth. Sinopec Shanghai Petrochemical (SHA:600688) (NYSE:SHI) returned to profitability from a loss a year ago. Aluminum Corp. of China (SHA:601600) returned to profitability and rose 0.21%. But it was China's third largest coal miner, Yanzhou Coal (SHA:600188) (NYSE:YZC) that cheered investors in Shanghai by advancing 3.25%. China Eastern Airlines (SHA:600155) (NYSE:CEA) returned to profitability as well and rose 0.71%.

But trading in Hong Kong reflected weak American market sentiment. The Hang Seng Index fell -408.01 points or -1.84% to 21,761.58 points at the close. Property developers are hurt on policy change, requiring transparency and more down payment for luxury condos. Investors fear wealthy Chinese will pass on purchasing high end property in the city due to regulation change. Index heavy weight HSBC Plc (HKG:0005) (NYSE:HBC) fell -1.25% following report that defaults surged to 48% in September along with noncollectable write-offs. The number of stocks that fell outnumbered those that gained eight to one. Airliners outperformed in Hong Kong, China Southern Airlines (HKG:1055) (NYSE:ZNH) advanced 1.7% after announcing plans to expand overseas. Rival Air China (HKG:0753) rose 0.8%.

But shares of oil producer Petrochina (HKG:0857) (NYSE:PTR) fell -3.0% while CNOOC ltd. (HKG:0883) (NYSE:CEO) shed -3.4% as price of oil retreated below $80 a barrel. Weakness of Aluminum Corp. of China (NYSE:ACH) (HKG:2600), Yanzhou Coal (HKG:1171) (NYSE:YZC) and China Life Insurance (HKG:2628) (NYSE:LFC) spell trouble ahead of the NYSE trading.

There are two main factors looking forward. foe one, index futures point to a lower open. And for two, investors hope to get a glimpse of hope from the new home sales and report on durable goods on Wednesday. NYSE listed Chinese ADRs that reported earnings today include Aluminum Corp. of China (NYSE:ACH), Yanzhou Coal (NYSE:YZC), Petrochina (NYSE:PTR), China Easdtern Airlines (NYSE:CEA), Sinopec Shanghai Petrochemical (NYSE:SHI), SMIC (NYSE:SMI).

Chinese ADRs are vulnerable from a technical point of view. The significant change in the 20-DMA reading suggest more short term weakness ahead.

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The Chinese ETF reading for today spells trouble for the Morgan Stanley China Fund (NYSE:CAF), the China Real Estate ETF (NYSE:TAO) and the global shipping ETF (NYSE:HAO).

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