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Risk appetite fuel China stocks in Asia

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risk_1 August 15, 2011 (Chinavestor) Chinese stocks extended a late rally from last week into Monday. A broad rally sent the Hang Seng Index (INDEXHANGSENG:.HSI) 640.1 points or 3.2% higher for the day. Each and every component of the Xinhua 25 Index rose, boding well for the iShares FTSE/Xinhua China 25 Index (NYSE:FXI) ahead the opening bell. Besides trading in Asia, earnigns will move China stocks listed in the U.S. on Monday. China Housing & Land Development (NASDAQ:CHLN) will report before the opening bell along with China Zenix Auto Int. (NYSE:ZX) and General Steel (NYSE:GSI) among others. Oversold insurance and energy stocks surged in Hong Kong. Yanzhou Coal Mining (HKG:1171) jumped 7.1% while China Life Insurance (HKG:2628) rose 6.1%. CNOOC Ltd. (HKG:0883) gained 4.92% on Monday.  Financial stocks led the advance among components of the Shanghai Composite Index (SHA:000001), lifting the Mainland's most used gauge 33.6 points or 1.3% for the day.

The Ministry of Finance published on its website that local governments can sell their assets to generate cash if needed and are not at risk of default, sending financial stocks an a winning binge. Each and every financial stocks advanced among components of the Shanghai Composite Index (SHA:000001) as a result. But the rally was not limited to the sector among large caps. Stocks that advanced outnumbered those that fell ten to one among the 50 largest components of the Shanghai Composite Index (SHA:000001).

Zijin Mining (SHA:601899), China's largest gold miner, fell 1.1% in Shanghai as price of gold shed for the third day in a row. But a broad rally among components of the Hang Seng Index (INDEXHANGSENG:.HSI)  helped Zijin's H-shares advance 2.6%  Risk tolarance in on the rise among investors as fears of a global economic distress faded away. Chinese airliners did well in Hong Kong iwth China Eastern Airlines (HKG:0670) advancing the most. China Unicom (HKG:0762) was the best among telecom shares while China Mobile (HKG:0941) rose a mere 1.1%, the least among 42 components of the Hang Seng Index (INDEXHANGSENG:.HSI).

As an indication of the strength of the rally in Hong Kong, investors have to consider that each and every industry leader rose as is evidenced by the components of the iShares FTSE/Xinhua China 25 Index (NYSE:FXI). U.S. investors like this ETF, the iShares FTSE/Xinhua China 25 Index (NYSE:FXI), as a gauge for large cap Chinese stocks. The FXI correlates very closely with the Hang Seng China Enterprise Index (INDEXHANGSENG:HSCEI), a barometer for Chinese stocks listed in Hong Kong.

pre_2011815

Outlook for large cap Chinese ETFs is bright if trading in Hong Kong was a good proxy. China Life Insurance (NYSE:LFC), China Unicom (NYSE:CHU) and CNOOC ltd. (NYSE:CEO) were among the best performing components of the Hang Seng Index (INDEXHANGSENG:.HSI) on Monday. Yanzhou Coal Mining (NYSE:YZC) surged over 7% for the day! China Eastern Airlines (NYSE:CEA) outperformed larger rival China Southern Airlines (NYSE:ZNH) in Hong Kong for the day, boding well for the Shanghai based airliner.

Earnings continued to move Chinese ADRs on Friday. AsiaInfo-Linkage (NASDAQ:ASIA) fell 13.7% on Friday on weak earnings but ChinaCast Education (NASDAQ:CAST) rose 11.9% after investors digested second quarter earnings. China Housing & Land Development (NASDAQ:CHLN) surged 12.9% on Friday but is up over 70% for the week ahead of earnings.  Looking forward, investors should pay attention to the China stock earnings calendar for the current week.



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