Jan. 7, 2010 (Chinavestor) Shanghai Stock Exchange listed shares of Chinese companies fell the most in two months amid first signs of credit tightening. The Central Bank of China sold three months treasuries at higher interest rates, the first increase in five months, and signaled tighter credit ahead to curb record lending and fight inflation. The Shanghai Composite Index fell -61.44 points or -1.89% to 3,192.78 at the close. Construction materials, financials and autos lead the decline. Baoshan Iron & Steel (SHA:600019), China's largest steel maker, fell -4.8% followed by Saic Motor (SHA:600104) and Bank of Communications (SHA:601328) with a -4.4% and -3.5% decline, respectively. The selloff in Shanghai was fairly universal, only two components of the 50 member SSE-50 Index eked out some gains.
The Hang Seng Index off Hong Kong opened flat but fell in the afternoon session as news from the Mainland sinked in. The Hang Seng Index declined -147.22 points or -0.66% to 22,269.45 at the close. HK listed Chinese companies weighted down the index but oversold power producers gained; Huaneng Power (HKG:0902) advanced 1.7%, Datang Power (HKG:0991) rose 1.4% and Huadian Power (HKG:1071) gained 0.5%.
Index futures point to a lower open as investors are leery ahead of upcoming non-farm payroll data on Friday. American listed Chinese stocks or ADRs have gained significant momentum in 2010 as the following technical summary suggests. Investors will have to watch overbought China shares very closely on Thursday. For a stock specific breakdown visit today's overbought/oversold report.
Looking at Chinese and global economy related ETFs and indices from a technical point of view, global shipping is back on track. The Global Shipping ETF (NYSE:SEA) is very strong reflecting investors' optimism that economies all over the world are improving. Small cap Chinese stocks have been performing better as the China Small Cap ETF (NYSE:HAO) testifies. While many thought that the Morgan Stanley China A-share Fund (NYSE:CAF) is going to be among the best ETFs in early 2010, lack of momentum comes as a surprise. But don't expect the CAF to improve much today when the Shanghai Composite fell almost 2%.