July 28, 2011 (Chinavestor) Stock prices soared by the end of the trading session in Hong Kong, trimming previous losses earlier the session. But no such rally helped stocks on the Mainland, pushing the Shanghai Composite Index (SHA:000001) 14.7 points or 0.5% lower for the day. The Hang Seng Index (INDEXHANGSENG:.HSI) ended the day 29.1 points or 0.1% higher. But the mood was mixed, at best. Most large caps fell in Shanghai, stocks that fell outnumbered those that advanced four to one among the 50 largest components of the Shanghai Composite Index (SHA:000001). The decline was somewhat less universal in Hong Kong. Stock that fell outnumbered those that advanced three to one among components of the 42 member Hang Seng Index (INDEXHANGSENG:.HSI). But it wasn't as bad for components of the iShares FTSE/Xinhua China 25 Index (NYSE:FXI), the most liquid Chinese ETF. Stocks that fell outnumbered those that advanced two to one among 25 components of the underlying index.
The DJIA fell 198.8 points, the most in over two months, as debt ceiling talks deteriorated. Weak durable goods order numbers further weighted down the markets. All but two components of the index advanced while the rest fell. The mood was somber in Asia in the morning but it all changed when value investors stepped up. The Hang Seng Index (INDEXHANGSENG:.HSI) soared over 200 points in the afternoon trade as investors focused on corporate earnings and valuations. Corporate profits of Chinese companies rose over 50% from last year, making stocks attractive on valuation.
Selected small cap Chinese stocks did well but most of them fell, as Chinese ETF prices testify. Large cap proxy, iShares FTSE/Xinhua China 25 Index (NYSE:FXI) fell 1.4% a day before. Smaller counterpart fared better for the Guggenheim China Small Cap ETF (NYSE:HAO) lost 0.7% only.
If components of the Hang Seng Index (INDEXHANGSENG:.HSI) were a proxy for ADR trading, outlook is best for Aluminum Corp. of China (NYSE:ACH).