December 31, 2010 (Chinavestor) Chinese stocks rose sharply in Shanghai at the last day of the year as investors picked up value stocks ahead of the new year. The Shanghai Composite Index (SHA:000001) advanced 48.5 points or 1.7% while the Hang Seng Index (INDEXHANGSENG:.HSI) rose a mere 36.1 points or 0.2%.
Most components of the Shanghai Composite Index (SHA:000001) rose on Friday, with only two stocks out of the largest 50 components of the index falling. Metal, mining and resource stocks led the index higher while financial stocks digested yesterdays' rally. But despite three days of advances, the Shanghai Composite Index (SHA:000001) lost 14% for the year, the most since the 2008 slump. The index surged 80% in 2009 after recovering from the 2008 disaster but failed to establish itself above the 3,000 mark.
The Hang Seng Index (INDEXHANGSENG:.HSI) managed to eke out some gains for the year, rising 5.3% in 2010. Hong Kong investors keep an eye on the west in addition to China, where interest rates are pegged to the U.S. This helped the Hang Seng Index (INDEXHANGSENG:.HSI) to mitigate losses from the mainland.
Most large cap stock advanced on Friday in Hong Kong, as components of key ETFs testify. Twenty one out of twenty five components of the iShare FTSE/Xinhua 25 China Index (NYSE:FXI) advanced in Hong Kong, suggesting large cap Chinese ADRs will open with a positive bias.
Small caps were mixed, stocks that advanced outnumbered those that fell two to one among 160 components of the Guggenheim Small Cap China ETF (NYSE:HAO).
Volatility is back for Chinese ADRs as well as the overbought indicator testifies. The number of Chinese stocks trading at extremes is on the rise with selected China stock popping. If components of the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as proxy for ADR trading, outlook is best for energy stocks but airliners are expected to fall.