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China stocks take a breath in Asia, Oct. 26

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decline_9 October 26, 2010 (Chinavestor) Both major Asian indices for Chinese equities fell on Tuesday as investors took profits ahead of more U.S. economic and corporate data. The Shanghai Composite Index (SHA:000001) shed 9.9 points or 0.3% while the Hang Seng Index (INDEXHANGSENG:.HSI) closed 26.7 points or 0.1% lower.

China Eastern Airlines (NYSE:CEA) and China Southern Airlines (NYSE:ZNH) continued to rally in Hong Kong suggesting a similar move is about to follow in New York. But BYD Company (HKG:1211), a Chinese electric car maker backed by U.S. investor Warren Buffet, fell 10.3%, the most among components of the 42 member Hang Seng Index (INDEXHANGSENG:.HSI). H-shares of Aluminum Corp. of China (NYSE:ACH) and Yanzhou Coal (NYSE:YZC) fell 4.3% and 2.5%, respectively. The former on falling commodity prices the latter on profit taking. A domestic gas price increase of 3% helped H-shares of Petrochina Co. Ltd. (NYSE:PTR) to advance 0.9% in Hong Kong and in Shanghai.

But investors turned cautious on the Mainland as the Shanghai Composite Index (SHA:000001) rose 27% since July, prompting a sell-off. Mining and resource stocks succumbed to profit taking, led by Jinduicheng Molybdenum (SHA:601958). It was followed closely by Jiangxi Copper (SHA:600362), the largest Chinese producer of the metal, and Zijin Mining (SHA:601899), the largest gold miner in China. Ping An Insurance (SHA:601318), the second largest insurer and a sensitive stock to the overall performance of the market, fell 4.2%, the most among the 50 largest components of the Shanghai Composite Index (SHA:000001). 

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Index futures point to a lower opening as the dollar is gaining strength. When the greenback firms up, prices of energy and commodity stocks fell a pinch, weighting down on indices. But lower energy, in particular oil, prices boost profitability of airliners, something that may help China Eastern Airline (NYSE:CEA) and China Southern Airlines (NYSE:ZNH) to keep its momentum from Asia.  If components of the Hang Seng Index (INDEXHANGSENG:.HSI)  can serve as a proxy for Chinese ADRs, outlook is dim for Aluminum Corp. of China (NYSE:ACH) and Yanzhou Coal (NYSE:YZC). China's largest oil producer, Petrochina Co. Ltd. (NYSE:PTR), is looking vulnerable should oil prices continue to fall.



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