October 27, 2010 (Chinavestor) China stocks succumbed to profit taking in Asia on Wednesday pushing the Shanghai Composite Index (SHA:000001) back under the 3,000 level. The Hang Seng Index (INDEXHANGSENG:.HSI) tumbled 436.7 points or 1.9% as investors sold-off shares before the FED announced the size of the debt repurchase program. Some argue that it won't be as large as many hoped, prompting a broad sell-off in Asia. Stocks that fell outnumbered those that advanced forty one to one among components of the 42 member Hang Seng Index (INDEXHANGSENG:.HSI). The decline was universal in Shanghai as well, stocks that fell outnumbered those that advanced five to one among the 50 largest components of the Shanghai Composite Index (SHA:000001).
The airline sector led the decline in Hong Kong; China Southern Airline (HKG:1055) (NYSE:ZNH) tumbled 6.6% followed closely by China Eastern Airline (HKG:0670) (NYSE:CEA) and Air China (HKG:0753), China's flagship carrier. Buffet backed BYD Company (HKG:1211) was the worst performing component of the Hang Seng Index (INDEXHANGSENG:.HSI) for the second day in a row after reporting a 99% drop in earnings. Energy stocks suffered as the dollar firmed up; Petrochina Co. Ltd. (HKG:0857) (NYSE:PTR), the largest Chinese oil producer, fell 4.3% while Yanzhou Coal Mining (HKG:1171) tumbled 4.5%. CNOOC Ltd. (HKG:0883) (NYSE:CEO), China's offshore oil specialist, fell 2.5% just like China Life Insurance (NYSE:LFC) (HKG:2628).
The sell-off was less severe in Shanghai nevertheless investors locked in profits. Resource, metal and energy stocks fell as the dollar firmed up. Western Mining (SHA:601168) fell the most among the 50 largest components of the Shanghai Composite Index (SHA:000001) but Zijin Mining (SHA:601899), China's largest gold miner, was close to follow. SAIC Motor (SHA:600104), the largest car maker in China, trimmed its advance to 19% for the month after a sizable fall on Wednesday. But property developers advanced following comments from Citigroup that property curbs can suppress demand only temporarily. Poly Real Estate (SHA:600048), the largest Shanghai listed developer, advanced 1.1% while China Vanke (SHE:200002), the largest developer in the country, advanced 3.14% in Shenzhen.
Turning to the U.S., earnings calendar for Chinese ADRs is relatively light for the day. VisionChina Media (NASDAQ:VISN) fell sharply in the last two hours of trading before earnings announcement this morning. More upcoming announcements: China stock earnings calendar, October 25-29.
Index futures point to a lower open as questions about the size of the FED debt repurchase program may disappoint. If components of the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as proxy for Chinese ADR trading, outlook is really dim for China Southern Airlines (NYSE:ZNH) and China Eastern Airlines (NYSE:CEA). But energy stocks are under pressure, hurting prospects for Petrochina Co. Ltd. (NYSE:PTR) and CNOOC Ltd. (NYSE:CEO), as well as for Yanzhou Coal Mining (NYSE:YZC). Volatile China Life Insurance Co. (NYSE:LFC) is another stock of concern for the day.
But oversold E-House Holdings (NYSE:EJ) may find solace in the latest developement from China. China Housing & Land Development, Inc. (NASDAQ:CHLN) may extend its rally following gains of components of the Shanghai Composite Index (SHA:000001) today.