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Euro Woes Hurt Stocks Globally, Jan 10

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currency_3 January 10, 2011 (Chinavestor) Pressure on Portugal to seek bail-out mounted, sending stocks tumbling globally. The Shanghai Composite Index (SHA:000001) fell 46.4 points or 1.7% while the Hang Seng Index (INDEXHANGSENG:.HSI) tumbled 159.4 points or 0.7%.The decline was universal in both markets: stocks that fell outnumbered those that advanced six to one on the Mainland while only eight components of the 42 member Hang Seng Index (INDEXHANGSENG:.HSI) managed to eke out some gains.

Sinopec Shanghai Petrochemical (NYSE:SHI) (HKG:0338), China Southern Airlines (NYSE:ZNH) (HKG:1055) and China Eastern Airlines (NYSE:CEA) (HKG:0670) were among stocks that fell the hardest among components of Hong Kong's main gauge. But offshore oil specialist CNOOC Ltd. (NYSE:CEO) (HKG:0883), another NYSE cross-listed blue chip, rose 1.3%. Outlook for the most liquid Chinese ETF, the iShares FTSE/Xinhua China 25 Index (NYSE:FXI), looks perilous given the broad sell-off of large cap China stocks in Hong Kong on Monday.

Resource, metal and mining stocks fell the most in Shanghai as the dollar firmed up, easing prices for raw materials. Financials weathered the storm relatively well as most of the bad news are already incorporated in their stock price, some argued.

pre_2011110

Looking at individual components of key Chinese ETFs in Asia this morning, only two out of 25 components of the iShares FTSE/Xinhua China 25 Index (NYSE:FXI) advanced. CNOOC Ltd. (NYSE:CEO) and China Telecom (NYSE:CHA) rose but that was nothing in comparison to the bloodbath the rest of large caps suffered. Airliners, financials, resource and metal stocks fell on the weaker euro- stronger dollar proposition.

Small caps did relatively better in Asia in the wake of the firm dollar, as components of the Guggenheim China Small Cap ETF (NYSE:HAO) testify. Stocks that fell wwere about the same among the 160 plus componetnet of the small cap China stock proxy.

pre_2011110_etf

If components of the Shanghai Composite Index (SHA:000001) and the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as proxy for ADR trading, outlook is dim for airliners China Southern Airlines (NYSE:ZNH) and China Eastern Airlines (NYSE:CEA) for the day. Sinopec Shanghai Petrochemical (NYSE:SHI), China's largest ethylene producer, is expected to gap way down as well. CNOOC Ltd. (NYSE:CEO) and China telecom (NYSE:CHA) may be the only bright spot for China stock investors at the open.



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