May 18, 2010 (Chinavestor) Shares of Chinese companies advanced in Hong Kong and in Shanghai after bargain hunters stepped up to the plate. Morgan Stanley upgraded the Chinese financial sector to "equal weight", suggesting Chinese policy markets will held back further tightening measures as Europe's ebbs play out. The Hang Seng Index (Indexhangseng:.HSI) rose +229.7 points or +1.2% and the Shanghai Composite Index (SHA:000001) advanced 34.9 points or +1.3% to 2,594.78 by the close. The rally was universal in both markets; stocks that advanced outnumbered those that fell 5:1 in Hong Kong and 9:1 in Shanghai.
Besides real estate and financial plays, Chinese telcos outperformed. China Unicom (HKG:0762) (YNSE:CHU) rose +2.1% followed by China Telecom (HKG:0728) (NYSE:CHA) with a 2.0% advance. Shares of China Mobile (HKG:0941) (NYSE:CHL) ended the day 1.5% higher. Chinese airliners fell foretelling a gloomy day for China Eastern Airlines (NYSE:CEA) and China Southern Airlines (NYSE:ZNH).
The second largest Chinese property stock, Poly Real Estate (SHA:600048) advanced the most from the 50 largest Chinese listed companies while China's largest gold miner, Zijin Mining (SHA:601899) fell the hardest on Tuesday, suggesting s fundamental shift is in the works. Investors snapped up oversold China shares from the real estate, financial and construction sectors while sold off gold.
Besides economics, earnings have been moving Chinese ADRs. Perfect World (NASDAQA:PWRD) fell -25% on lackluster growth on Monday. Sina Corp. (NASDAQ:SINA), ChinaNet Online (NASDAQ:CNET), Giant Interactive (NYSE:GA), China Nepstar Chain Drugstore Ltd. (NYSE:NPD) reported 2010 Q1 since the closing bell on Monday. For Chinavestor coverage, visit China stock earnings calendar May 17-21.
Chinese indices remain in the defensive despite today's gains, suggests the overbought/ oversold monitor. Upside for large cap Chinese ADRs is going to be limited though, the China ADR Index (CAI) remains much stronger from a technical point of view than most underlying Chinese indices like the Hang Seng Index (Indexhangseng:.HSI) or the Shanghai Composite Index (SHA:000001).