December 17, 2010 (Chinavestor) China stock investors turned cautious ahead the weekend in Asia, leaving the Shanghai Composite Index (SHA:000001) and the Hang Seng Index (INDEXHANGSENG:.HSI) virtually unchanged from Thursday. The broad mainland index, the Shanghai Composite Index (SHA:000001), shed 4.4 points or 0.2% while the Hang Seng Index (INDEXHANGSENG:.HSI) eked out a small 46.1 points or 0.2% gain. Investors are concerned with Ireland's rating cut by Moody's and possible interest rate hikes in China, despite most U.S. economic indicators point to a recovery.
Chinese ADRs to watch on Friday include airliners, PetroChina Company Limited (NYSE:PTR), Aluminum Corp. of China (NYSE:ACH), Yanzhou Coal (NYSE:YZC) and China Telecom (NYSE:CHA).
Large cap proxy iShares FTSE/Xinhua 25 China Index (NYSE:FXI) is in danger ahead the open, if Asian trading was an indicator.
PetroChina Company Limited (SHA:601857) fell hard in Shanghai but was trading sideways in Hong Kong, suggesting the largest Chinese oil producer will open with a negative bias on the NYSE. Hong Kong listed H-shares of Yaznhou Coal (HKG:1171) fell 1.1% suggesting China's third largest coal miner will gap down at the open. Besides the energy sector, China Telecom (HKG:0728) fell hard in Hong Kong earlier on Friday, indicating a weak outlook for the ADR on Friday.
But oversold Chinese airliner, China Southern Airlines (HKG:1055), bounced back 3.4% after falling 20% for the month. Smaller rival China Eastern Airlines (HLG:0670) rose 3.3%. Both companies made it to the top five performing components of the Hang Seng Index (INDEXHANGSENG:.HSI). Aluminum Corp. of China (SHA:601600), third largest producer of the metal in the world, made it to the top five stocks among the 50 largest componetns of the Shanghai Composite Index (SHA:000001). Chalco's H-shares (HKG:2600) rose 1.3% in Hong Kong, setting a stage for a positive market day on the NYSE for its ADR, (NYSE:ACH).
Outlook for small cap Chinese ETFs improved from yesterday. Looking at components of the Guggenheim Small Cap China Fund (NYSE:HAO), stocks that advanced outnumbered those that fell two to one in Asia on Friday. But outlook is more sober for large caps, most components of the iShares FTSE/Xinhua 25 China Index (NYSE:FXI) fell in Asia this morning.
Index futures point to a narrow open for U.S. stocks as investors focus on the tax bill that passed the House last night. If components of the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as proxy for ADR trading, outlook is best for China Southern Airlines (NYSE:ZNH) and China Eastern Airlines (NYSE:CEA). But Aluminum Corp. of China (NYSE:ACH) and Sinopec Shanghai Petrochemical (NYSE:SHI) is looking good before the open as well.
Stocks with potential downside include China Telecom (NYSE:CHA) and Yanzhou Coal (NYSE:YZC). PetroChina Company Limited (NYSE:PTR) is in limbo right now with a negative bias.