November 15, 2010 (Chinavestor) Chinese shares bounced back in Shanghai on Monday, following their biggest drop for 2010 last Friday. The Shanghai Composite Index (SHA:000001) advanced 29.0 points or 1.0% led by financials. But investors in Hong Kong remained cautious following a weak U.S. showing on Friday; the Hang Seng index (INDEXHANGSENG:.HSI) shed 195.4 points or 0.8% on Monday.
Key stocks included China Eastern Airlines (NYSE:CEA), China Southern Airlines (NYSE:ZNH) and China Mobile (NYSE:CHL) with some upside but energy stocks fell hard led by Yanzhou Coal (NYSE:YZC), China Petroleum & Chemical Corp. (NYSE:SNP), and Petrochina Co. Ltd. (NYSE:PTR).
Looking at the 50 largest components of the Shanghai Composite Index (SHA:000001), four of the five best performers of the day came from the financial sector. Industrial and Commercial Bank of China (SHA:601398), the largest financial institution in the world, surged 6.8% recording its best daily performance for the year. The rally of the industry leader helped the rest of the se ctor. Volatile China Citic Bank (SHA:601988) rose 2.2% while Bank of Communications (SHA:601328) advanced 2.1%. Bank of China (SHA:601968), the second largest Chinese lender, advanced 1.8%.
While investors embraced the financial sector, resource and energy stocks succumbed to profit taking. Western Mining (SHA:601168) fell the most among the 50 largest Shanghai Composite Index (SHA:000001) components. Zijin Mining (SHA:601899), the largest Chinese gold miner, tumbled 4.2% while Jiangxi Copper (SHA:600362), the largest producer of the metal, fell 3.7% as demand is about to slow on softer auto sales forecasts.
Trading was different in Hong Kong though where investors keep an eye on the U.S. in addition to China. Friday's plunge of the Dow didn't leave much room for improvement for the Hang Seng Index (INDEXHANGSENG:.HSI), prompting a broad sell-off on Monday. Stocks that fell outnumbered those that advanced five to one with energy and resource stocks suffering the most. Yanzhou Coal Mining (HKG:1171), the third largest Chinese coal miner, tumbled 4.0% while China Shenhua Energy (HKG:1088), the largest coal miner of the country, fell 3.1%. But oil firms were not much better off either. Petrochina Co. Ltd. (HKG:0857), the largest Chinese oil producer, fell 1.95% followed closely by CNOOC Ltd. (NYSE:HKG:0883). China Petroleum & Chemical Corp. (HKG:0386), Asia's largest refiner, fell 2.46%.
But selected airliners advanced, like China Eastern Airlines (HKG:0670) and China Southern Airlines (HKG:1055). The largest mobile operator in the world, China Mobile (HKG:0941), managed to eke out a small gain despite a broad sell-off of the market.
Looking at the performance of the components of key Chinese ETFs, large caps experienced a broad sell-off. Only two components of the iShares FTSE/Xinhua 25 Index (NYSE:FXI) advanced in Asia this morning, a slight improvement from last Friday when each and every component of the FXI fell. H-shares of China Mobile (HKG:0941) (NYSE:CHL) managed to stay in the black but energy and resource plays fell hard. China Coal (HKG:1898) and China Shenhua Energy (HKG:1088), the second and the largest Chinese coal miners, led the decliners along with Air China (HKG:0753), but China Petroleum & Chemical Corp. (HKG:0386) and Aluminum Corp. of China (HKG:2600) were not much fun either. Small caps remained volatile giving some room for cheers but the overall picture was dim; stocks that fell outnumbered those that advanced four to one among components of the Guggenheim China Small Cap ETF (NYSE:HAO).
If components of the Shanghai Composite Index (SHA:000001) and the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as proxies for ADR trading, outlook is the brightest for NYSE listed China airliners and China Mobile (NYSE:CHL). China Eastern Airlines (NYSE:CEA) is looking slightly better than China Southern Airlines (NYSE:ZNH) ahead the opening bell on Monday. But Yanzhou coal (NYSE:YZC) is expected to fall hard along with most oil stocks. China Petroleum & Chemical Corp. (NYSE:SNP) is the most vulnerable integrated oil company this morning but Petrochina Co. Ltd. (NYSEPTR) and CNOOC Ltd. (NYSE:CEO) will most likely open in the red as well.