May 19, 2011 (Chinavestor) Investors followed the direction of U.S. indices in Hong Kong on Thursday, but the Shanghai Composite Index (SHA:000001) fell 13.0 points or 0.5% as inflation fears hurt investor sentiment. The mood was different in Hong Kong where the Hang Seng Index (INDEXHANGSENG:.HSI) advanced 152.2 points or 0.7% in a broad rally. Stocks that advanced outnumbered those that fell two to one among components of the index. This is a positive development for the most liquid Chinese ETF, the iShares FTSE/Xinhua 25 China Index (NYSE:FXI) ahead the opening bell.
Yanzhou Coal Mining (HKG:1171), the fourth largest coal miner, surged 5.0% as price of coal rose. China Shenhua energy (HKG:1088), the largest Chinese coal miner, rose 6.5% in the past three days. But higher energy prices hurt airliners and oil refiners.
Key Chinese ETFs advanced on Wednesday and are set to continue to show strength on Thursday. Most components of the iShares FTSE/Xinhua 25 China Index (NYSE:FXI) advanced in Asia, boding well before the NYSE open. China Unicom (HKG:0762), the second largest Chinese mobile carrier that will sell Blackberry in China, outperformed the rest of the sector. But high oil prices send shares of Air China (HKG:0753) to the bottom among components of the iShares FTSE/Xinhua 25 China Index (NYSE:FXI).
Earnings will continue to sharpe the Chinese ADR landscape on Thursday. Melco Crown Entertainment (NASDAQ:MPEL), SinoTech Energy Ltd. (NYSE:CTE) and SMIC (NYSE:SMI) are going to report earnings before the opening bell.
If components of the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as proxy for ADR trading, outlook is best for Yanzhou Coal Mining (NYSE:YZC) and China Unicom (NYSE:CHU), but airliners and Sinopec Shanghai Petrochemical (NYSE:SHI) are expected to fall. Large cap proxy iShares FTSE/Xinhua 25 China Index (NYSE:FXI) is looking good just as is the Guggenheim Small Cap China ETF (NYSE:HAO).