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China stocks trade in narrow range in Asia on Wednesday

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telescope1 March 3, 2010 (Chinavestor) Shares of Chinese companies were looking for direction on Wednesday in Asia as both the Hang Seng Index (INDEXHANGSENG:.HSI) and the Shanghai Composite (SHA:600001) were trading in a narrow range. The Hang Seng Index (INDEXHANGSENG:.HSI) was trading sideways ending the day -29.32 points or -0.14% lower at 20,876.79. The telecom sector underperformed; China Mobile (HKG:0941) (NYSE:CHL) dragged down the index with a -2.4% decline followed by China Unicom (HKG:0762) (NYSE:CHU). Another NYSE-HKEx cross-listed blue chip, China Eastern Airline (HKG:0670) (NYSE:CEA), fell -1.3% on Wednesday, falling the third day in row after a five day winning streak last week. Volatility is back for China Eastern Air (HKG:0670) for sure.

Earnings announcements rattles nerves for U.S. listed Chinese companies this week. Monday was the day of online gamers, Tuesday we saw Mindray Medical (NYSE:MR) and VisionChina Media (NASDAQ:VISN) reporting while Canadian Solar (NASDAQ:CSIQ), China Nepstar (NYSE:NPD), and Spreadtrum Comm. (NASDAQ:SPRD) are scheduled for today, among others.

Shares of Canadian Solar (NASDAQ:CSIQ) are trading higher after earnings announcement this morning. While shipments grew 94% YoY net revenues declined FY2009 vs. FY2008. This speaks volumes of the margin erosion Chinese solar companies have endured. But most of the bad news are already incorporated into the stock prices of solar makers, giving room for upside.  The good news is that revenues grew significantly in the fourth quarter from the previous one, suggesting the worst may be over!

Shares of VisionChina Media (NASDAQ:VISN) fell 30% ahead the bell after 2009 Q4 report. The company reported sluggish revenue growth for Q4 while net income fell. Worse yet, the company issued a low 2010 Q1 revenue guidance, a drop of 25% from current quarter. The -30% drop in share price is a painful reminder that small cap Chinese stocks carry enormous risk and investing in them requires a strong stomach. Nevertheless high risk comes with high return, something that keep investing in small stocks alive.

Volatility is back for Chinese ADRs all across the board, as is evidenced by the following measures: the number of overbought and oversold stocks is on the rise, as is the number of China ADRs trading above their 50 day moving average.

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Looking at Chinese indices and indicator, the market is looking for direction. This is evidenced by the small size and the position of the arrow- all are trading in a narrow range close to the center. Sharp eyed investors take notice that real estate stocks have started to come off lows the strongest - measured by the relatively strong performance of the China Real Estate ETF (NYSE:TAO). Latest studies suggest China overtook the U.S. as the world largest property investment market in 2009, and the trend is here to continue.

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