September 7, 2011 (Chinavestor) Rumors that monetary tightening is about to end sent China stocks to a broad rally on the Mainland. The Shanghai Composite Index (SHA:000001) surged 45.6 points or 1.8% with all but one of the 50 largest components of the index advancing. Industrials, real estate and financials stocks rose after the China Securities Journal reported that the Central Bank may loosen monetary policy.
Optimism helped lift China stocks in Hong Kong as well. The Hang Seng Index (INDEXHANGSENG:.HSI) rose 337.5 points or 1.7%. Yanzhou Coal Mining (HKG:1171) was the best component of the 42 member index while China Life Insurance (HKG:2628) rose 3.3%. Smaller rival Ping An Insurance (HKG:2318) rose just as much.
Such momentum bodes well for the iShares FTSE/Xinhua China 25 Index (NYSE:FXI) and the Guggenheim China Small Cap ETF (NYSE:HAO) ahead the opening bell.
The rally was universal in Hong Kong as well. Stocks that advanced outnumbered those that fell seven to one among components of the 42 member Hang Seng Index (INDEXHANGSENG:.HSI).
Mainland China stocks, or H-shares, did well in Hong Kong. All but four components of the Xinhua 25 China Index advanced, boding well for the most liquid Chinese ETF, the iShares FTSE/Xinhua China 25 Index (NYSE:FXI). Small caps enjoyed a similarly broad advance measured by the performance of the Guggenheim China Small Cap ETF (NYSE:HAO). Stocks that advanced outnumbered those that fell ten to one among components of the Guggenheim China Small Cap ETF (NYSE:HAO).
If components of the Hang Seng Index (INDEXHANGSENG:.HSI) were proxy for ADR trading on Wednesday, outlook is solid for China Life Insurance (NYSE:LFC) and Yanzhou Coal Mining (NYSE:YZC). But Chalco (NYSE:ACH) and Huaneng Power (NYSE:HNP) are in jeopardy before the opening bell today.