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China stocks end June 2011 on high note

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advance9 June 30, 2011 (Chinavestor) Chinese stocks ended June on a high note thanks to a passage of austerity measures by the Greek government. Despite fierce protests, the passage deflated fears that the eurozone's smallest economy will default for the short term. Longer term perspective remains shaky though. Nevertheless investors around the world  turned bullish, sending stocks in Asia higher in a broad rally. All but one stock among the 50 largest components of the Shanghai Composite Index (SHA:000001) rose on the mainland. Momentum was even stronger in Hong Kong where the Hang Seng Index (INDEXHANGSENG:.HSI) surged 1.5% for the day. Stocks that advanced outnumbered those that fell four to one among components of the 42 member Hang Seng Index (INDSEHANGSENG:.HSI). This sets a positive outlook for Chinese ETFs such as the iShares FTSE/Xinhua China 25 Index (NYSE:FXI) and small cap proxy Guggenheim China Small Cap ETF (NYSE:HAO).

Price of oil rose to just below $95 a barrel, sending energy and commodity stocks higher. But airliners and transportation stocks fell. BYD Company (HKG:1211) bounced back up 5.1% after an 8% dive a day before.

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Large cap stocks enjoyed an unusually sound rally for the day. Only five components of the 25 member Xinhua China 25 Index fell. This bodes well for the iShares FTSE/Xinhua China 25 Index (NYSE:GXI), the most liquid Chinese ETF. Rally was universal among smaller cap, too. Stocks that advanced outnumbered those that fell five to one among components of the Guggenheim China Small Cap ETF (NYSE:HAO).

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Small cap Chinese stocks remained volatile and are expected to behave the same way going forward. There has been a lot of disappointment of Chinese ADRs, especially those that got listed via reverse mergers.

If components of the Hang Seng Index (INDEXHANGSENG:.HSI) can serve as proxy for ADR trading, outlook is best for resource player Aluminum Corp. of China (NYSE:ACH). China Life Insurance (NYSE:LFC) and CNOOC Ltd. (NYSE:CEO) have sound outlook for Friday as well.



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