China Aftershock Seen Rattling Stocks

Sunday's destructive aftershock to China's earlier, catastrophic earthquake is expected to dampen sentiment on Chinese bourses Monday.

The aftershock measuring 6.4 on the Richter scale killed two, injured more than 480 others and destroyed and damaged more than 270,000 houses, according to local news reports. It hit Guangyuan City in Qingchuan County at 4.21 pm local time, or 4.21 am EST. Tremors were felt 800 miles away in Beijing, where high-rise office buildings swayed, according to local news reports.

Sunday's aftershock is the largest tremor in China since a 7.8-magnitude earthquake struck Sichuan Province on May 12.

While the damage caused by Sunday's aftershock so far seems to be significantly less than that caused by the earlier quake, traders say that stock exchanges in China and Hong Kong will react badly Monday.

"The impact will be the same as before, and will only hit sentiment, although there weren't as many deaths this time," says Gavin Parry, a director of Helmsman Global Trading in Hong Kong.

Market participants in the region were already gearing up this weekend for a down day after crude oil hit an intraday high of $134 a barrel in New York Friday, dragging down stocks in the U.S.

Sectors that may buck Monday's bearish trend include zinc producers such as Jianxi Copper, according to Parry. China is the largest global exporter of zinc, a metal used in the process of galvanizing steel. The earthquake has sent previously sluggish zinc prices soaring more than 6%, since it is a large a resource of Sichuan province.

By Friday, the Shanghai Composite Index had gained 1.2% since May 12, mainly as a result of buying in large oil producers such as CNOOC(CEO - Cramer's Take - Stockpickr) and PetroChina(PTR - Cramer's Take - Stockpickr), and in "earthquake recovery" plays. Traders said that they expect construction and infrastructure stocks that have been bought up in the aftermath of the earthquake to lose momentum in the coming week.

The aftershock comes on the same day that officials in Beijing announced that the death toll from the earlier earthquake has now claimed 62,664 lives, with 23,775 missing, and 6,537 people so far pulled from the rubble.

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