December 16, 2010 (Chinavestor) Both major Asian China stock indices fell on Thursday as investors position themselves for more interest rate hikes. Investors in Hong Kong were looking for reasons to turn bullish ahead of more U.S. data. The Shanghai Composite Index (SHA:000001) fell 13.3 points or 0.5%Most large cap Chinese stocks fell expect for China Unicom (NYSE:CHU) and Petrochina (NYSE:PTR). China Eastern Airlines (NYSE:CEA) and China Southern Airlines (NYSE:ZNH) continued the free fall, shedding 20% in December. while the Hang Seng Index (INDEXHANGSENG:.HSI) fell 306.6 points or 1.4%. The index lost 750 points or 3.4% just in the last two days, the second biggest two day loss for the year.
The decline was universal in both markets, stocks that fell outnumbered those that advanced five to one in Hong Kong and four toe one in Shanghai. Ping An Insurance (SHA:601318), the second largest Chinese insurer, fell the most out of the 50 largest components of the The Shanghai Composite Index (SHA:000001) and fell hard in Hong Kong as well.
Looking at components of key ETFs in Asia this morning, outlook is weak for large cap Chinese stocks. All but two components of the 25 member iShare FTSE/Xinhua 25 China Index (NYSE:FXI) fell on Thursday suggesting a weak opening for this Chinese large cap proxy. The FXI fell twice that of small cap proxy Guggenheim Small Cap China Fund (NYSE:HAO0 on Wednesday, a trend that may continue into Thursday.
If components of the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as a proxy for ADR trading, large cap Chinese stocks are expected to suffer, but China Unicom (NYSE:CHU) and Petrochina Co. Ltd. (NYSE:PTR) has some of the smallest downside. But China Southern Airlines (NYSE:ZNH) is going to continue going downhill, if this assumption is right.