December 29, 2010 (Chinavestor) China stocks advanced in Asia on Wednesday as bottom fishers stepped up to the plate. The Shanghai Composite Index (SHA:000001) advanced 18.5 points or 0.7% while the Hang Seng Index (INDEXHANGSENG:.HSI) surged 347.6 points or 1.5%. The rally was universal in Hong Kong, stocks that advanced outnumbered those that fell seven to one.
Energy companies advanced the most in Hong Kong. H-shares of NYSE-HKEx cross-listed CNOOC ltd. (NYSE:CEO), China's offshore oil driller, rose 2.6% followed by Petrochina Co. Ltd. (NYSE:PTR), China's largest oil producer. Sinopec (NYSE:SNP), Asia's largest refiner, advanced 2.1%.
Value investors in Shanghai stepped forward as average P/E for mainland listings fell to 17.7 from 32 a year ago. The Shanghai Composite Index (SHA:000001) is off 16% YTD, making it one of the worst performers for the year. Mainland investors are increasingly concerned about interest rate hikes as the country continues to fight inflation. Industrials rose on earnings growth prospect. SAIC Motor (SHA:600104), China's largest car maker and China South Locomotive (SHA:601766) outperformed the broad market.
Looking at key Chinese ETFs this morning, outlook is sweet for the iShares FTSE/Xinhua 25 China Index (NYSE:FXI). All but one component of the ETF advanced in Hong Kong earlier this morning.
But light trading volume renders most of the gains vulnerable to a correction. U.S. investors have been cautious ahead of the upcoming earnings season, kicking off in January. if components of the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as proxy for ADR trading, outlook is best for oil major CNOOC Ltd. (NYSE:CEO) and Petrochina Co. Ltd. (NYSE:PTR), but Chinese telecoms remain under water.