August 24, 2010 (Chinavestor) Investors were split in Asia about outlook for China stocks: Mainland investors took merit from a possible extension of government stimuli while investors in Hong Kong got caught up in the latest global phenomena: slow recovery instilled sell-off. The Shanghai Composite Index (SHA:000001) advanced 0.4 percent but the Hang Seng Index (INDEXHANGSENG:.HSI) tumbled 230.3 points or 1.1 percent.
PCCW Ltd. (HKG:0008), a telecommunications company, dived 9.8 percent following news that the company plans to issue additional shares despite dire market conditions. Aluminum Corp. of China (HKG:2600) (NYSE:ACH), the third largest producer of the metal in the world, fell 4.4 percent following soft second quarter earnings announcement. Index heavy weight China Mobile (HKG:0941) (NYSE:CHL) and HSBC Plc. (HKG:0005) (NYSE:HBC) fell 2.0 percent and 1.6 percent, respectively. Sell-off was universal, stocks that fell outnumbered those that advanced five to one, weighting down energy stocks as well. Asia's largest refiner, Sinopec Corp. (HKG:0386), (NYSE:SNP) and China's largest oil producer, Petrochina (HKG:0857) (NYSE:PTR), shed 1.6 percent and 1.2 percent, respectively
The Shanghai Composite Index (SHA:000001) managed to stay over the water thanks to real estate and insurance companies. Poly Real Estate (SHA:600048), the largest Shanghai listed property developer, advanced 2.3 percent while Ping An Insurance (SHA:601318), the second largest Chinese insurer, rose 0.6 percent on strong second quarter results. Construction related stocks - steel and real estate - rose on hope that government stimuli will kick in to counterbalance slower global growth. Wuhan Iron & Steel (SHA:600005) and Baoshan Iron & Steel (SHA:600019), China's third and first iron markers, rose 3.2 percent and 1.7 percent, respectively. Jiangxi Copper (SHA:600362), the largest producer of the metal in China, advanced 1.5 percent.
But financial stock fell following anticipation that more debt will hurt balance sheet of the nation's largest banks. Industrial and Commercial Bank of China (SHA:601398), the world's largest financial institution, fell 0.5 percent followed by Bank of Communications (SHA:60 1328), china Merchant Bank (SHA:600036) and Industrial Bank of China (SHA:601166).
If Hong Kong can serve as a proxy ahead of China ADR trading in New York, expect large cap stocks show weakness. Most vulnerable Chinese ADR today include Aluminum Corp. of China (NYSE:ACH), China Mobile (NYSE:CHL) and HSBC Plc. (NYSE:HBC). Oil stocks will feel the pinch of lower oil price, Sinopec (NYSE:SNP) and Petrochina (NYSE:PTR) are expected to fall, along with CNOOC Ltd. (NYSE:CEO), China's offshore oil specialist.