Commodity stocks pull Chinese indices higher in Asia

truck_2 March 1, 2010 (Chinavestor) Chinese indices advanced in Asia thanks to a number of factors. For one, copper and other non-ferrous metal prices rose sharply pushing share prices higher for Jiangxi Copper (HKG:0358) and Aluminum Corp. of China (HKG:2600) as metal supply is feared be disrupted by the large earthquake in Chile. For two, latest statistical data show manufacturing activity in China slowed in February, part of it is due to the long Chinese New Year Holiday, suggesting measures to cool the economy have been successful so far. Investors worry what a hard lending might mean for the markets and any news that's contrary to overheating is take very well. For three, corporate news are encouraging on Monday. Ping An Insurance (HKG:2318), the second largest Chinese insurer, won regulatory approval to acquire Shenzhen Development Bank. China Vanke (SHE:200002), the largest property developer in China, reported net income growth of +32% YoY on strong sales.

The Hang Seng Index (INDEXHANGSENG:.HSI) advanced +448.23 points or +2.17% to 21,056.93 points at the close. The rally was universal, stocks that advanced outnumbered those that fell ten to one out of the 42 member Hang Seng Index (INDEXHANGSENG:.HSI).

Looking at individual stock of the index Jiangxi Copper (HKG:0358), China's largest producer of the precious metal, was the best performing component of the index with a +5.8% rally for the day. Chile, the largest producer of the metal, is rocked by the large earthquake raising fears that production is going to be severely effected. Shares of Aluminum Corp. of China (HKG:2600) advanced +3.6% on the news as metal prices rose sharply in the London Metal Exchange. China Unicom (HKG:0762) (NYSE:CHU) was the best performing HKEx-NYSE cross-listed China play on Monday with a +5.% advance, a strength carried over from last Friday following a Deutsche Bank upgrade from Sell to Buy. But shares of China Eastern Airline (HKG:0670) (NYSE:CEA) fell -2.2% breaking a five day winning streak - as the stock got overbought. Expect more weakness to come...

Index futures point to a higher open for American exchanges ahead of key manufacturing data. When markets are strong, momentum China plays typically shine. For the best momentum China stocks of the day visit today's overbought/oversold report.

On the earnings front some key China plays are reporting today. The largest Chinese online game operator and developer, Shanda Interactive (NASDAQ:SNDA) and her online game unit Shanda Games (NASDAQ:GAME), reported before the open and are trading sharply lower before the open. While profits rose 13% from last year and sales surged, net income fell from last quarter making investors worry about the outlook of the upcoming six months. Perfect World (NASDAQ:PWRD) reported strong fourth quarter profit yet her shares are down -7.5% before the open. Shanda's weakness will be a drag on the sector for a couple of days to come before the markets fully digest the news.

Mindray Medical (NYSE:MR), a high quality Chinese medical equipment maker, is going to report after the close along with small cap AirMedia Group (NASDAQ:AMCN).

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The Shanghai Composite Index have moved away from the bottom but the most dramatic development is the sudden fall of the 10-Year Treasuries. This is a reflection on the loss of confidence in the U.S. equity markets, a potential indicator that bears are just around the corner. Investors, cash is king... until bulls begin to rule again.

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