April 18, 2011 (Chinavestor) Weak profitability of the U.S. financial sector, Greece's default risk, and fiscal tightening in China are driving index futures lower on Monday morning. Citigroup Inc. (NYSE:C) reported a bottom line fall of 32% on sluggish revenue, the second large financial institution to disappoint after Bank of America (NYSE:BAC) report last week. Fears that Greece won't be good on making upcoming payments sent the euro lower and commodities - such as oil - higher. On top of these news, Chinese policy makers increased reserve bank ratio the weekend after an interest rate hike a week before as China is trying to reign in inflation. More monetary tightening is coming, according to Central Bank Governor Zhou Xiaochuan.
Now wonder, shares of Chinese companies fell in Asia on Monday. The Hang Seng Index (INDEXHANGSENG:.HSI), a good proxy for Chinese ADRs on the NYSE, fell177.8 points or 0.7% for the day, extending losses from last week. The Shanghai Composite Index (SHA:000001), the most widely used index for Mainland stocks, eked out a small 6.5 points or 0.2% gain as investors looked at strong corporate profits.
Huawei Technologies Ltd., one of the largest Chinese telecommunications equipment maker along with ZTE Corp., reported record profits and sales growth of over 500% in the last three years.
Oversold China Eastern Airlie (HKG:0670) rose 1.8% in Hong Kong, making it the best performing NYSE cross-listed components of the Hang Seng Index (INDEXHANGSENG:.HSI). But Aluminum Corp. of China (HKG:2600) (SHA:601600) - known as Chalco - fell hard in both markets, as demand for the metal softened as Alcoa's (NYSE:AA) quarterly report suggested.
Looking at NYSE cross-listed large cap components of the Shanghai Composite Index (SHA:000001), China Petroleum & Chemical Corp. (SHA:600028), the largest refiner in Asia, pared the best after a 1.8% advance. But resource play Western Mining (SHA:601168) and Aluminum Corp. of China (SHA:601600) were among the worst five performing components of the Shanghai Composite Index (SHA:000001) for the day.
Outlook is mixed for large cap China ADR by looking at components of key Chinese ETFs on Monday. Stocks that fell outnumbered those that advanced two to one among components of the 25 member Xinhua 25 China Index. This bodes ill for its ETF, the iShares FTSE/Xinhua 25 China Index (NYSE:FXI).
But the decline was much less universal among small cpa China stocks in Asia this morning as components of the Guggenheim Small Cap China ETF (NYSE:HAO) testify.
Selected Chinese online game developers surged last Friday, Shanda Games (NASDAQ:GAME) and Giant Interactive (NYSE:GA) taking the lead. Low volume Noah Education Holdings (NYSE:NED) surged 17% despite an analyst downgrade. But it's going to be energy prices and U.S. corporate earnings that will drive the markets on Monday. If components of the Hang Seng Index (INDEXHANGSANEG:.HSI) can serve as proxy for ADR trading, outlook is best for China Eastern Airlines (NYSE:CEA) and China Unicom (NYSE:CHU) among large cap China stocks. But Aluminum Corp. of China (NYSE:ACH) and Petrochina Co. Ltd. (NYSE:PTR) are in jeopardy, based on trading in Asia on April 18.