February 9, 2011 (Chinavestor) The interest rate hike in China on Tuesday sent shares tumbling in Hong Kong and Shanghai. Investors fear that monetary tightening will slow down growth while additional curbs on lending will hurt the real estate sector even more. The Hang Seng Index (INDEXHANGSENG:.HSI) dived 320.3 points or 1.4% while the Shanghai Composite Index (SHA:000001) fell 25.8 points or 0.9%.
Hong Kong listed H-shares of Sinopec Shanghai Petrochemical (NYSE:SHI) fell the most among 42 members of the Hang Seng Index (INDEXHANGSENG:.HSI). China Petroleum & Chemical Corp. (NYSE:SNP), known as Sinopec, followed its polymer unit very closely. Chinese airliners fell hard as well. China Southern Airlines (HKG:1055) (NYSE:ZNH) tumbled 4.0% while Air China (HKG:0753), China's flagship carrier, dived 4.6%. China Eastern Airlines (HKG:0670) (NYSE:CEA), the second largest carrier in China, fell 2.57%.
NYSE listed Chinese ETFs are going to fell the pinch, most likely. Most large cap stocks fell in Asia this morning, boding ill for the iShares FTSE/Xinhua China 25 Index (NYSE:FXI). Guggenheim China Small Cap ETF (NYSE:HAO) and the PowerShares Golden Dragon Halter USX China (NYSE:PGJ) is going to follow overall market sentiment, if Asia is a guide for ETF trading.
The sell-off was universal in both key Asian markets. Stocks that fell outnumbered those that advanced ten to one among the fifty largest components of the Shanghai Composite Index (SHA:000001). Resource and metal stocks, those that are used in construction, fell the hardest on the Mainland. Jiangxi Copper (SHA:600362), the largest producer of the metal in China, fell 4.1% followed closely by Jinduicheng Molybdene (SHA:601958) and Aluminium Corp. of China (SHA:601600). Poly Real Estate (SHA:600048), the largest property stock among components of the Shanghai Composite Index (SHA:000001), fell 3.4%.
Looking at components of key Chinese ETFS in Asia on Wednesday morning, outlook is bleakest for large cap stocks. All but two components of the 25 member iShares FTSE/Xinhua China 25 Index (NYSE:FXI) fell on Wednesday in Asia, led by integrated oil companies and airliners.Sinopec (NYSE:SNP), Asia's largest refiner, fell hard followed closely by Petrochina Co. Ltd. (NYSE:PTR), China's largest oil producer. Most components of the Guggenheim China Small Cap ETF (NYSE:HAO) fell and it is unlikely that the PowerShares Golden Dragon Halter USX China (NYSE:PGJ)is going to escape a broad sell-off.