April 14, 2011 (Chinavestor) Investors in China turned defensive on Thursday in Asia. High commodity prices hurt investor sentiment in Shanghai, sending the Shanghai Composite Index (SHA:000001) 7.3 points or 0.2% lower for the day. Investors in Hong Kong are worried about upcoming earnings in the U.S. after Alcoa Inc. (NYSE:AA), the first DJIA component to report, missed sales forecasts. The Hang Seng Index (INDEXHANGSENG:.HSI) fell 121.0 points or 0.5% for the day. China stock investors in the U.S. were going after large, liquid NASDAQ names to trim risk. Sina Corp. (NASDAQ:SINA) surged $8.68 or 7.8% on Wednesday, the most in 2011. Baidu.com Inc. (NASDAQ:BIDU), the largest NASDAQ listed Chinese ADR by market cap, advanced 3.54% as well. Sohu.com (NASDAQ:SOHU), 51job Inc. (NASDAQ:JOBS) and Youku.com Inc. (NASDAQ:YOKU) all outperformed the market by a wide margin.
Most components of the Hang Seng Index (INDEXHANGSENG:.HSI) fell on Thursday as investors eyed the U.S. for clues. Airliners led the decline after two days of strong gains as price of oil rose. China Eastern Airline (HKG:0670) and Air China (HKG:0753) fell the most among 42 members of the Hang Seng Index (INDEXHANGSENG:.HSI).
Trading was similar on the Mainland with most large cap components of the Shanghai Composite Index (SHA:000001) experiencing a sell off. SAIC Motor (SHA:600104), the largest Chinese auto maker, bounced back 0.5%. Another bellwether for industrials, China South Locomotive (SHA:601766) fell 2.6%, the most among the 50 largest components of the Shanghai Composite Index (SHA:000001).
Looking at key Chinese ETFs ahead the opening bell, outlook is better for small caps on Thursday. Stocks that advanced outnumbered those that fell among components of the Guggenheim Small Cap China ETF (NYSE:HAO), a complete opposite of components of the iShares FTSE/Xinhua 25 China Index (NYSE:FXI).
If components of the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as proxy for ADR trading, outlook is weak for China Eastern Airline (NYSE:CEA) and China Southern Airline (NYSE:ZNH). But Yanzhou Coal (NYSE:YZC) and China Unicom (NYSE:CHU) managed to eke out small gains in Hong Kong on Thursday, boding well for their ADR.
For trading ideas, the overbought/oversold technical indicator is following liquid NASDAQ names such as Sina Corp. (NASDAQ:SINA) and Baidu.com Inc. (NASDAQ:BIDU). Youku.com Inc. (NASDAQ:YOKU) is relatively new, explaining its absence from the screen.