June 21, 2010 (Chinavestor) Investors sent shares of Chinese companies higher in Asia on Monday following news that China will end its effective two year peg of the Yuan. While the rate and the magnitude of the change is uncertain, investors took it as a good step toward responsible economic policy ahead of the G-20 Summit. The rally was universal in Hong Kong; each and every component of the 42 member Hang Seng Index (INDEXHANSEGN:.HSI) advanced and only one component of the 50 member SSE-50 Index, tracking the performance of the fifty largest publicly traded company in Shanghai, rose. The Shanghai Composite Index (SHA:000001)advanced 73.0 points or 2.8% to 2,586.21 while the Hang Seng Index (INDEXHANGSENG:.HSI) jumped 626.3 points or 3.0% to 20,912.18.
Investors snapped up shares of Chinese domestic players, companies that conduct business within China. Shares of China Unicom (HKG:0762) (NYSE:CHU) led the rally thanks to a 9.1% jump while Chinese airliners shined just as much. Shares of China Eastern Airlines (HKG:0670) (NYSE:CEA) and the largest Chinese airline by fleet size, China Southern Airlines (HKG:1055) (NYSE:ZNH) advanced 7.1% and 6.5%, respectively.
Taking a closer look at Hong Kong on Monday, Chinese energy stocks outperformed the broad market as well. Shares of Yanzhou Coal (HKG:1171) (NYSE:YZC), the third largest Chinese coal miner, advanced 5.9% while Petrochina (HKG:0857) (NYSE:PTR), the largest energy company in China, jumped 4.7%. Shares of Aluminum Corp. of China (HKG:2600) (NYSE:ACH) rose 5.0%.
There is a lot of room left for improvement for Chinese ADRs ahead the bell on Monday as the chart above testifies. The number of Chinese ADRs trading above 20-DMA has been on the rise but medium and long term momentum, measured by 50-DMA and 200-DMA, is still absent. There is no China ADR trading at 52week highs, something that will change should the really spread.
Chinese ETFs are set to outperform the U.S. market on Monday. The iShares FTSE/Xinhua China 25 Index (NYSE:FXI), an ETF tracking the Hang Seng Index (INDEXHANGSENG:.HSI), is expected to rise three percent for the day. The Morgan Stanley China ETF (NYSE:CAF), tracking the Shanghai Composite Index (SHA:000001), is another ETF that has been a laggard in 2010 with room for improvement.