October 29, 2010 (Chinavstor) China stocks fell in Asia on Friday sending both the Shanghai Composite index (SHA:000001) and the Hang Seng index (INDEXHANGSENG:.HSI) lower for the day. Mainland investors took profits the last day in October. The Shanghai Composite Index (SHA:000001) was the best performing global index in October, recording its best monthly gain for the year.
Investors in Hong Kong remained cautious ahead of U.S. GDP data and the anticipated action of the FED. The Hang Seng Index (INDEXHANGSENG:.HSI) fell 114.5 points or 0.5% on Friday. Telecom and energy stocks led the decline as earnings and falling oil prices took a toll on the sectors. China Telecom (HKG:0728), the largest fixed line operator with a fast growing mobile segment, fell 3.13% after falling short of quarterly growth. The company reported net income growth of just over 10%, the best among major players, but is seen as too small for the company to catch up with larger giant China Mobile (NYSE:CHL). China Life Insurance (HKG:2628) fell 3.0% as Q3 net profit fell YoY.
Stocks in the energy sector succumbed to profit taking after price of oil fell. Sinopec (HKG:0386), Asia's largest refiner, fell 1.7% followed by Petrochina Co. ltd. (HKG:0857). All three oil majors reported sound revenue and earnings growth for the quarter but most of that has been already incorporated in their stock price.
Investors turned defensive in the Mainland for two reasons. For one, profit taking at the end of the month is a prudent step considering the large bull run for October. Also, investors are increasingly nervous about steps the government is going to take to fight inflation and prevent housing asset bubbles. All said, financial and real estate stock weighted down the index. ICBC (SHA:601398), the largest financial institution in the world, fell 2.24% while Poly Real Estate (SHA:200048), the largest property developer among components of the Shanghai Composite index (SHA:000001) tumbled 4.9%.
Index futures point to a lower open, suggesting Chinese ADR are going to trade with a negative bias. If components of the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as a proxy for China ADR trading, outlook is dim for China Life insurance (NYSE:LFC), Petrochina Co. Ltd. (NYSE:PTR) and Sinopec (NYSE:SNP). But Chinese airliners may be able to bounce back on the NYSE as well, led by China Eastern Airline (NYSE:CEA) followed by China Eastern Airline (NYSE:ZNH). CNOOC Ltd. (NYSE:CEO) is a dark horse; despite some advance in Hong Kong, falling oil prices doesn't bode well for this pure oil producer.