Dec. 22, 2009 (Chinavestor) The Hang Seng Index broke a five day losing streak on Tuesday and advanced 143.94 points or 0.69% to 21,092.04 at the close. The catalyst for Hong Kong is American investor optimism that the economic recovery is on track. Oversold Chinese airliners bounced back off strongly; Air China (HKG:0753) jumped 9.1% followed by China Eastern Airline's (HKG:0670) 3.2% advance. China Southern Airlines (HKG:1055) advanced 0.4%. Looking at HKEx-NYSE cross-listed blue chips, China Life Insurance (HKG:2628) advanced 1.5% followed by Aluminum Corp. of China (HKG:2600). H-shares of Yanzhou Coal (HKG:1171) advanced 1.9%.
But trading in Shanghai was just the opposite. Chinese central bank governor Zhou Xiaochuan warned that regulators will keep high reserve rations for banks in 2010 in order to avoid asset price bubbles. This in turn hurt financial stocks; index heavy weight Industrial and Commercial Bank of China (ICBC) (SHA:601398), the world's largest financial institution by market value, fell -1.36%. Profit taking has been hurting China plays in Shanghai for over a week as investors free up cash to participate in the IPO roll out at the end of the year. The Shanghai Composite Index fell -72.45 points or -2.32% to 3,050.52 at the close.
Index futures point to a higher open but are off previous highs. S&P Futures fell from +3.2 to +3.0 while NASDAQ futures fell from +8.5 to 5.80 between 6:35 and 9:15 as economic growth came out less impressive then originally thought. Yet there is a strong sense of investor optimism as the Treasury Bill yield curve testifies. T-Bills are on fire according to the overbought/oversold monitor - see chart at the bottom of this report. The Chinese real estate ETF (NYSE:TAO) is oversold and is ready to bounce back off. Another potential good play is the iShares FTSE/Xinhua 25 Index (NYSE:FXI). While the FXI lost -5.04% in the last five trading days the PowerShares Gld Drg Haltr USX China (NYSE:PGJ) is down by a mere -2.58%.