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China shares on fire in Asia on cross-straight investment deal

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advance9 March 17, 2010 (Chinavestor) After weeks of trading in narrow range with no direction, Chinese shares took an aim at heading up as cross-straight tension eased with a historical accord. China and Taiwan agreed to let their insurance, brokerage and lender companies investing in each other for the first time. The positive tone, coupled with the day end rally on Wall Street, sent Chinese indices higher on Wednesday.

The Shanghai Composite advanced +57.64 points or +1.93% back above 3,000 to 3,050.48. The rally was universal, each and every component of the SSE-50, measuring the largest 50 stocks listed in Shanghai, advanced! Insurance companies were on fire, shares of Ping An Insurance (SHA:601318) rose +5.8%, China Pacific Insurance (SHA:601601) advanced +3.9% and China Life Insurance (SHA:601628) (NYSE:LFC) rose +2.8%. Large cap index heavy weight Petrochina (SHA:601857) (NYSE:PTR) advanced +1.3% and Industrial and Commercial Bank of China (SHA:601398), the largest financial institution in the world, rose +1.2%.

The Hang Seng Index advanced +361.56 points or +1.72% to 21,384.49. The rally was universal, all components of the 42 member index advanced but China Southern Airline (HKG:1055) (NYSE:ZNH). Large cap Petrochina (HKG:0857) advanced +2.3% while Industrial and Commercial Bank of China, known as ICBC, (HKG:1398) rose +1.4%. Shares China Eastern Airline (HKG:0670) advanced +4.9%.

Some of the most extreme movers among Chinese stocks listed on American soil include Melco Crown Entertainment (NASDAQ:MPEL) with a +8.3% rally yesterday. Shares of American Dairy (NYSE:ADY) rose +7.7% followed by Yucheng Technologies (NASDAQ:YTEC). Earnings hurt HQ Sustainable Maritime Ind. (AMEX:HQS) sending it down -10.5% on Tuesday. ATAI Inc. (NYSE:ATA) and shares of China Fire & Security Group (NASDAQ:CFSG) were hammered after worse-than-expected earnings announcements.

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Volatility is back for Chinese stocks by looking at the U.S. listed China stock universe from a technical point of view. The number of China ADRs trading above their 20-DMA is declining but the number of ADRs above their 50+DMA is on the rise, suggesting short term momentum is gone but some still are holing on to momentum stocks. The neutral position of the RSI composite of Chinese ADRs suggests that the market can go either way with no indication of any direction. It is going to be decided by U.S. market sentiment on Wednesday. Considering that index futures point to a higher open as U.S. and Japanese Central Banks left rates unchanged, China stock investors are set to enjoy a positive market day.

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Let's take a look at Chinese indices, ETFs and other key markets from a technical point of view. The Shanghai Composite (SHA:000001) has been trading in a narrow range as the following chart suggests. The index just bounced back off above the psychologically important 3,000 level today. Shares of Chinese companies listed on American stock exchanges have been weathering the storm better and are ahead of their Asian listings. This in turn means that today's big rally in Asia is not necessarily translate big gains for U.S. China stock investors. American indices, DJIA, S&P500 and the NASDAQ are not overbought, leaving room to the upside.

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