Jan. 5, 2010 (Chinavestor) Shares of Chinese companies advanced in Hong Kong and Shanghai on the second day of trading in 2010. The Hang Seng Index climbed +456.3 points or +2.09% to 22,279.58 at the close. Every component of the forty four member index advanced but China Eastern Air (HKG:0670) while trading of Hutchinson Telecom (HKG:2332) remained suspended following news the company is trying to buy out phone unit. Resource, energy and financial stocks led the rally; Zijin Mining (HKG:2899), China's largest gold miner, advanced 11.2% followed by Aluminum Corp. of China (HKG:2600). Shares of Yanzhou Coal (HKG:1171) rose 8.5% while Jiangxi Copper (HKG:0385), another precious metal miner, advanced 7.5%. Index heavy weight Petrochina (HKG:0857) ended 5.9% higher the day.
Trading in Shanghai was almost as strong as in Hong Kong. The Shanghai Composite Index advanced +37.69 points or +1.16% to 3,281.45 at the close. Financials and resource plays led the rally. Extreme cold weather in China helped coal producers while news that futures contracts will be allowed to trade as early as March helped brokerages. A-shares of Aluminum Corp. of China (SHA:601600) , Zijin Mining (SHA:601899)and Jiangxi Copper (SHA:600362) outperformed in Shanghai as well.
Index futures point to a narrow open after European stocks took a breather on Tuesday after a strong start in 2010. Investors' optimism is fueled by strong U.S. manufacturing activity but Fridays' non farm payroll data will be all important. Despite strong showing on Monday, Chinese ADRs are far from overbought, leaving more room to the upside. Expect NYSE listed Aluminum Corp. of China (NYSE:ACH) and Yanzhou Coal (NYSE:YZC) to shine on Tuesday.
Investors looking for opportunity should pay close attention to the Chinese real estate ETF, Claymore AlphaShares Real Estate ETF (NYSE:TAO). This ETF is lagging behind the overall market and will eventually catch up. Another asymmetry to watch for is the lack of momentum for the Morgan Stanley China ETF (NYSE:CAF) compared to her peer, the Shanghai Composite.