October 6, 2011 (Chinavestor) A broad rally sent the Hang Seng Index (INDEXHANGSENG:.HSI) soaring 922.0 points or 5.4% on Thursday. The Shanghai Stock Exchange remained closed for the week in observance of a National Holiday. Chinese stocks led the rally for their composite, the Hang Seng China Enterprises Index (INDEXHANGSENG:.HSCE) surged 5.8%, outperforming the broad index. China Southern Airlines(HKG:1055) led indices higher with a 19.3% surge. China Eastern Airline (HKG:0670) and Air China (HKG:0753) advanced over 10%. Airliners fell hard in late September and October, making the sector attractive on valuation. Yanzhou Coal Mining (HKG:1171) recovered 10.1% after a significant slump from earlier the month after the company purchased rights to develop potash fields in Saskatchewan, Canada. China Life Insurance (HLG:2628) rose 5.0%.
The rally was universal, all but three components of the Hang Seng Index (INDEXHANGSENG:.HSI) advanced on Thursday. The jump came after the stock exchange was closed on Wednesday, missing out on two days' straight rallies in the rest of the world. Investors hope that European policy makers will come to terms with Greece's next rescue package.
Looking at Hong Kong listed mainland companies, the picture is bright. Not only did the Hang Seng China Enterprises Index (INDEXHANGSENG:.HSCE) outperform the broad market but each and every component of the Xinhua China 25 Index advanced. This bodes well for the iShares FTSE/Xinhua China 25 Index (NYSE:FXI), the most liquid Chinese ETF.
But advances was not limited to small large cap stocks. Stocks that advanced outnubered those that fell twenty to one among components of the Guggenheim China Small Cap ETF (NYSE:HAO).
If trading in Asia can serve as proxy for the direction of Chinese ADRs, outlook is best for China Southern Airlines (NYSE:ZNH) and China Eastern Airlines (NYSE:CEA).