January 11, 2011 (Chinavestor) Shares of Chinese companies rose in Asia on Tuesday reversing a broad sell-off a day before. Investors gained confidence following news that China's foreign reserves hit a record $2.85 trillion and that Japan is going to buy Portuguese euro debt besides China. Asia's two economic powerhouses have stepped up efforts to support the euro helping lift investor sentiment globally. The Hang Seng Index (INDEXHANGSENG:.HSI) rose 233.1 points or 1.0% while the Shanghai Composite Index (SHA:000001) advanced 13.0 points or 0.5%. The rally was universal among large cap stocks in both Asian markets. Stocks that advanced outnumbered those that fell ten to one among the 50 largest components of the Shanghai Composite Index (SHA:000001) and four to one among the 42 components of the Hang Seng Index (INDEXHANGSENG:.HSI).
Hong Kong listed H-shares of China Telecom (NYSE:CHA) rose for the second day as rumors spread that the company will have the iPhone. Sinopec Shanghai Petrochemical (NYSE:SHI), China's largest ethylene producer, bounced back up in Hong Kong following a 5.4% dive on Monday. But power generators fell as price of coal surged, boding ill for Huaneng Power International (NYSE:HNP), China's largest independent power generator.
While the rally was broader in Shanghai than in Hong Kong, index heavy weight ICBC (SHA:601398) weighted down the Shanghai Composite Index (SHA:000001). Insurance companies, China Life Insurance (SHA:601628) and Ping An Insurance (SHA:601318), struggled to get off the ground as well. All told, the financial and insurance sectors mitigated the gains for the rest of the market.
Tuesday was a day for large cap stocks in Asia as components of key Chinese ETFs testify. All but five components of the iShares FTSE/Xinhua China 25 Index (NYSE:FXI) rose in Hong Kong on Tuesday. This was in sharp contrast to small cap China stock proxy Guggenheim China Small Cap ETF (NYSE:HAO), where more components of the ETF fell than advanced.
If components of the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as proxy for ADR trading, outlook is bright for China Telecom (NYSE:CHA) and Sinopec Shanghai Petrochemical (NYSE:SHI) on Tuesday morning, but Hueneng Power International (NYSE:HNP) is going to have some headwinds. Chinese airliners did well in Hong Kong as well as oil major Petrochina Co. Ltd. (NYSE:PTR) and CNOOC Ltd. (NYSE:CEO).