April 8, 2011 (Chinavestor) Investors in Asia ended the week on a high note after digesting the latest round of interest rate hikes. With four such rate increases just in the past six months suggests there is no more to come in the near term, sending a buy signal for market participants. The Hang Seng Index (INDEXHANGSENG:.HSI) rose 114.3 points or 0.5% on Friday while the Shanghai Composite Index (SHA:000001) gained 22.2 points or 0.7%. Both indices are in the black for the week as well.
Oversold Chinese airliners bounced back up on Friday. China Southern Airlines (HKG:1055)(NYSE:ZNH) and China Eastern Airlines (HKG:0670)(NYSE:CEA) advanced 2.7% and 2.1%, respectively. China Unicom (HKG:0762)(NYSE:CHU) jumped 6.5% following a UBS upgrade. But profit taking took a toll at Yanzhou Coal Mining (HKG:1171) (NYSE:YZC), making it the worst component of the 42 member Hang Seng Index (INDEXHANGSAENG:.HSI) for the day.
SAIC Motor (SHA:600104), the largest Chinese car manufacturer, surged 8.2% making it the best performing large cap stock of the Shanghai Composite Index (SHA:000001). Demand for autos remained strong despite expiry of government subsidies, studies show.
Looking at components of key Chinese ETFs, outlook is good for most large caps. Most components of the iShares FTSE/Xinhua 25 China Index (NYSE:FXI) rose with China Unicom (NYSE:CHU) taking the lead. But overbought energy stock fell, such as Petrochina Co. Ltd. (NYSE:PTR).
Outlook is even better for small caps as components of the Guggenheim Small Cap China ETF (NYSE:HAO) testify. Stocks that advanced outnumbered those that fell four to one among the 162 components of this small cap China stock proxy.
If components of the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as proxy for ADR trading, outlook is best for China Unicom (NYSE:CHU) and Chinese airlines, but Yanzhou Coal (NYSE:YZC) and Petrochina (NYSE:PTR) are going to feel a pinch.