Shanghai, Hong Kong Put In Small Declines

Don't be lulled by the modest dips Tuesday in the Shanghai and Hong Kong stock indexes. Those markets haven't yet had the chance to react to the dreadful sell-offs suffered in Europe and North America bourses.
The Shanghai composite fell 1.2%, and Hong Kong's Hang Seng dipped just 0.2%. A survey from HSBC Holdings showed that China's factory activity grew in April, but at a slower pace than that seen in March.
HSBC's results differ from those seen in a government survey, which focuses more on bigger companies.
View Enlarged ImageAlso, after staying shut Monday for a holiday, Shanghai on Tuesday got its first chance to react to the central bank's hike of the bank reserve requirement.
The action, announced Sunday and slated to take effect May 10, is Beijing's effort to rein in the hot loans that are fueling a real-estate asset bubble. It forces banks to set aside a larger portion of deposits as cash, leaving less for lending.
Tighter credit, even from an absurdly free-and-easy posture, can send stocks reeling.
China's stocks, another market that Beijing doesn't want to see become a bubble, got hit with news Monday that Australia's government will move ahead on its plans for a 40% supertax on miners.
Shanghai, Hong Kong Tractor partsand the rest of the Asia-Pacific region now must brace for the storm that will hit their markets Wednesday.
This column has been scrutinizing China's auto industry, and the auto parts makers that are thriving in the world's biggest and fastest-growing vehicle market.
Fawne Jiang, a China auto analyst with investment bank Brean Murray, Carret & Co. is bullish on the sector and names three stocks on the top of her list. They are:
China Automotive Systems (CAAS), a maker of power-steering systems and other components. It's a member of the IBD 100.
SORL Auto Parts (SORL), a maker of air-brake valves, mostly for trucks and buses.
Wonder Auto Technology (WATG), a maker of alternators, starters and other electrical components.
None of these three could escape Tuesday's carnage. China Auto and Wonder fell 7% and 6% respectively, while Sorl dropped 9%.
Wonder Auto, writes Jiang in an April 8 research note, has "been able to defend and increase its market share through its strong execution." Look for Wonder to expand through acquisitions, Jiang says.
Wonder's sales accelerated the past four quarters, from 15% to 28% to 35% to 50% to 83%. Earnings rose 67% in Q4, after two straight flat readings.
But Wonder is a low-priced small-cap stock without the sort of sponsorship you want to see.