February 15, 2011 (Chinavestor) Shares of Chinese companies fell hard in Hong Kong and on the Mainland as inflation accelerated in January, raising the possibility of additional monetary tightening. The Hang Seng Index (INDEXHANGSENG:.HSI) dived 221.3 points or 1.0% led by companies that rallied the most the day before. Sinopec Shanghai Petrochemical (NYSE:SHI), the largest Chinese ethylene producer, gave up 5.4% from Monday's 6.8% gain in Hong Kong. China Southern Airlines (NYSE:ZNH) fell 2.9% after a 6.5% surge the day before. H-shares of China Mobile (NYSE:CHL) were relatively unharmed while the rest of the sector fell, led by China Unicom (NYSE:CHU).
But traders were less discouraged on the Mainland as earnings season opens up, limiting downside for the Shanghai Composite Index (SHA:000001). Chinese stocks are relatively cheap on valuation in Shanghai and with a 10% GDP growth, corporate profits are expected to remain strong. But financials gave back some of the gains from yesterday with the rest of the market trading sideways.
Most large cap stsocks fell among components of the Hang Seng Index (INDEXHANGSENG:.HSI), boding ill for the iShares FTSE/Xinhua 25 China Index (NYSE:FXI), a key Chinese ETF. Chinese telecoms fell, led by China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA). There wasn't much downside left ofr overosld China Mobile (NYSE:CHL) though.
On the corporate front, China Precision Steel Inc. (NASDAQ:CPSL) reported before the open today. The company reported soft numbers and is trading lower in pre-market hours. Shares of the company fell 14.3% already the day before, ahead of earnings. Ctrip.com Int. (NASDAQ:CTRP) was the stock to follow on Monday after reporting sound 2010Q4 but issuing a soft guidance for 2011 Q1. Shares of the company fell 5.4% but is expected to hold ground.