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China stocks rise in Shanghai, U.S. open subdued

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economy4Dec. 7, 2009 (Chinavestor) Shares of Chinese companies advanced in Shanghai but closed lower in Hong Kong on Monday. The Claymore/AlphaShares China Real Estate ETF (NYSE:TAO) and the Morgan Stanley China Fund (NYSE:CAF) are ETFs of interest today for U.S. investors.

 

Financials helped offset losses of commodity plays in Mainland China sending the Shanghai Composite +15.84points or  +0.48% higher to 3,332.89 at the close. Hong Kong market sentiment reflected the uncertainty surrounding the U.S. markets. The dollar rose as investor bet that the FED is going to raise interest rates sooner then originally thought. Investors have been pushing U.S. stock indices higher as the weak dollar pushed commodity plays higher and made high yielding stocks a better alternative to low yielding bonds. But if this is about to change, as many anticipates, money flows will help bonds and punish equities, at least for the near term.

Commodity plays, telecoms and power companies underperformed but airliners continued to shine in Hong Kong on Monday. The Hang Seng Index fell second day in a row to 22,324.96 as investors are looking for a direction for the market. Stocks that fell outnumbered those that gained four to one.

U.S. index futures point to a narrow open for China ADRs on Monday. Most China stocks lack short-term momentum as the following indicator testifies.

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Looking at Chinese ETFs from a technical point of view, the Morgan Stanley China ETF (NYSE:CAF) has upside potential left given the relatively strong performance of the Shanghai Composite. Remember, the Morgan Stanley China ETF (NYS:CAF) tracks the Shanghai Composite, an index that has advanced 7.1% vs. CAF's 1.4% performance since October 27.

This is a similar situation to Claymore/AlphaShares China Real Estate ETF (NYSE:TAO), an ETF that was relatively under-performing last week. We highlighted the TAO last Monday saying at the end of the report that "The Chinese real estate ETF, NYSE:TAO), seems way oversold compared to the rest of the universe and offers upside potential." TAO has performed accordingly by advancing 8.85% last week.
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