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Bottom fishing ups China stocks in Asia

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bottom_fishing_1 August 31, 2011 (Chinavestor) Investors had enough of selling by the end of August, giving opportunity for bottom fishers to step forward. The Hang Seng Index (INDEXHANGSENG:.HSI)  rose 330.7 points or 1.6% on the last day of the month in a broad rally. Stocks that advanced outnumbered those that fell six to one among 42 components of the index. Another indication of the strength of the rally in Hong Kong is that all but one component of the Xinhua 25 China Index, the index that the most liquid Chinese ETF the iShares FTSE/Xinhua China 25 Index (NYSE:FXI)  follows, advanced. Mainland investors stopped the Shanghai Composite index (SHA:000001) from falling as well, the index closed 0.7 points higher after three days of consecutive sell-offs.

H-shares of NYSE cross-listed stocks on the move in Hong Kong included Yanzou Coal Mining (HKG:1171)(NYSE:YZC), Sinopec Shanghai Petrochemcial (NYSE:SHI)(HKG:0338) and CNOOC Ltd (0883)(NYSE:CEO) to the upside. But airliners, China Southern Airlines (HKG:1055)(NYSE:ZNH) and China Eastern Airlines (HKG:0670)(NYSE:CEA) fell as price of oil touched $89 a barrel in Asia. Bottom fishing helped lift shares of China Life Insurance (HKG:2628)(NYSE:LFC) after an over 10% slide following earnings announcement.

Chinese stocks suffered heavy losses earlier the week after a surprise hike in the bank reserve ratio shocked Mainland investors on Monday. Financials shares surrendered most of their gains following sound quarterly reports. Corporate earnings were particularly strong within the financial sector thanks to record lending. But outlook for the sector is in limbo now that there is no end of the monetary tightening in sight. The Shanghai Composite index (SHA:000001) is off 8.5% YTD with the month of August contributing 4.9% to it. 

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Bargain hunters picked up oversold stocks in Hong Kong on Wednesday. Buffet backed BYD Company surged 5.2%, similar to auto maker, Brilliance China Auto (HKG:1114).  China Life Insurance (HKG:2628) rose 2.8%, its best daily gain in August. Yanzhou Coal Mining (HKG:1171) made another strong comeback on Wednesday on top of Tuesday's gains, yet the stock remains off 25% for the month!

Strong earnings helped lift Sinopec Shanghai Pterochemical (HKG:0338)(NYSE:SHI) but the advance of CNOOC Ltd. (HKG:0883)(NYSE:CEO) is again just a make up of some lost ground.

Chinese ETFs were a mixed bag on Tuesday, something that may change on Wednesday. All but one component of the iShares FTSE/Xinhua China 25 Index (NYSE:FXI) advanced in Asia on Wednesday, boding well for the ETF. The advance was less broad among small caps yet outlook remains good for the Guggenheim China Small Cap ETF (NYSE:HAO) if trading in Asia was a proxy.

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