April 20, 2011 (Chinavestor) Chinese stocks advanced in Asia on the back of sound earnings in America. The Hang Seng Index (INDEXHANGSENG:.HSI) surged 375.5 points or 1.6%, its best gain in April. The rally was led by large caps as evidenced by the components of the Xinhua 25 Index. Each and every component of the index advanced, boding well for the iShares FTSE/Xinhua 25 China Index (NYSE:FXI). This is a dramatic change from a day before when large caps suffered in both Asia and the U.S. Energy companies did best as price of oil surged just below $110. CNOOC Ltd. (HKG:0883), China's offshore oil driller, rose 3.0% just like Yanzhou Coal (HKG:1171), China's third largest coal miner. China Unicom (HKG:0762) was the best performing telco as operational statistics for the month surfaced.
Trading was less decisive on the Mainland where the Shanghai Composite Index (SHA:000001) eked out a 8.7 points or 0.3% gain. While corporate earnings are yet to come in China, investors were consumed by effects of presumed additional monetary tightening.
Resource stocks pulled major indices higher for the day. Zijin Mining (SHA:601899), the largest Chinese gold miner, rose the most among the 50 largest components of the Shanghai Composite Index (SHA:000001). Jiangxi Copper (SHA:600362) and Aluminum Corp. of China (SHA:601600) outperformed the market as well.
Just as we said before the opening bell on Tuesday, small cap ETFs outperformed large caps for the day. If trading in Asia can remain a proxy for Chinese ADR and ETF trading, outlook is best for large caps this time. Each and every component of the iShares FTSE/Xinhua 25 China Index (NYSE:FXI) advanced in Asia, suggesting a sound performance for the ETF on Wednesday. But China small cap investors have no reason to cry either; over 120 components of the 160 member Guggenheim Small Cap China ETF (NYSE:HAO) advanced.
The rally for Chinese airliners is in jeopardy on Wednesday as price of oil, and thus kerosene, bounced back up again. But oil major Petrochina (NYSE:PTR) and CNOOC Ltd. (NYSE:CEO) are looking very good before the opening bell. If components of the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as proxy for China ADR trading, outlook is best for China Uncom (NYSE:CHU) and Yanzhou Coal (NYSE:YZC).