January 19, 2011 (Chinavestor) Stocks advanced in China ahead of December inflation report, due tomorrow. Investors are looking for signs that inflation has been tamed, getting fiscal tightening off the table. The Hang Seng Index (INDEXHANGSENG:.HSI) jumped 265.6 points or 1.2% while the Shanghai Composite Index (SHA:000001) soared 50.3 points or 1.8%.
The rally was unusually strong in Shanghai, all but one of the 50 largest components of the Shanghai Composite Index (SHA:000001) advanced. Large caps had a sound day in Hong Kong as well, most components of the iShares FTSE/Xinhua China 25 Index (NYSE:FXI) advanced for the day.
NYSE cross-listed China Telecom (NYSE:CHA), Aluminum Corp. of China (NYSE:ACH) and Sinopec (NYSE:SNP) were among the best performing components of the Hang Seng Index (INDEXHANGSENG:.HSI). Chinese telcos reported operational statistics for 2010 and China Telecom (NYSE:CHA) is seen as one of the winners of the smartphone revolution in China. Aluminum Corp. of China (NYSE:ACH) announced its return to profitability in 2010, helping lift its shares. But airliners fell as price of oil reached another 52 week record. Airliners are sensitive to oil price increases as over 1/3rd of their cost is fuel related.
Most components of the iShares FTSE/Xinhua 25 China Index (NYSE:FXI) rose in Hong Kong, suggesting the ETF will have a sound day on the NYSE today. But Goldman Sachs (NYSE:GS) disappointed, putting pressure on the financial sector.
If components of the Shanghai Composite Inxdex (SHA:000001) can serve as proxy for ADR trading, outlook is good for industrials like China XD PLastics (NASDAQ:CXDC) and energy firms, but financials and related stocks are in trouble.