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HK stock blue chips end down but techs, China plays up

HONG KONG: Hong Kong blue chips ended Friday lower as concern over further US rate hikes hit banks and developers, while small-cap technology and China-related plays rose on Nasdaq's rally and local IPO anticipation.

The blue chip Hang Seng Index fell 2.25 percent or 382.07 points to 16,599.16, while China-related and technology plays gained. Total turnover was HK$27.34 billion, up from Thursday's HK$25.56 billion.

Blue chip companies that are hit by higher borrowing costs lost ground after Federal Reserve Chairman Alan Greenspan's comments to Congress reinforced a market perception that at least two interest-rate increases of 25 basis points each may be in the offing.

Blue chips were also hurt by investors who, taking profit from companies that hit record highs last week, sought cash to buy into IPOs coming up on the Growth Enterprise Market (GEM), analysts said.

Hutchison Whampoa Ltd, its parent Cheung Kong (Holdings) Ltd and China Telecom (Hong Kong) Ltd, which all hit record highs last on Friday, led the benchmark index down. The Hong Kong stock market's highest valued company, China Telecom, lost 4.09 percent or HK$2.50 to HK$58.50, accounting for 36 percent of the Hang Seng's fall.

Conglomerate Hutchison lost HK$2.50 to HK$121.50 while property giant Cheung Kong dropped HK$4.00 to HK$104.00.

Blue chip banks suffered as their profit margins are hurt by higher interest rates.

The Hang Seng finance index ended on Friday down 1.81 percent with HSBC Holdings Plc, Hong Kong's largest bank, falling HK$1.75 to HK$91.25.

Cable & Wireless (C&W HKT) bucked the blue chip losses, holding on to gains as investors awaited developments over a potential merger with Pacific Century CyberWorks (PCCW).

While rumours led to a week of volatile and heavy trading in PCCW and Friday bought no fresh news. PCCW denied rumours of Thursday that it had reached a deal with and rival bidder Singapore Telecommunications Ltd.

Hong Kong's largest telecom carrier rose 0.78 percent or HK$0.20 to HK$25.65. fell 1.55 percent or HK$0.40 to HK$25.40 and was the most actively traded stock on the exchange. Technology shares, especially firms considered target shell companies for overseas firms or with Internet potential, were buoyed by the Nasdaq settling above 4,500 for the first time. These shares tend to be less interest rate-sensitive, so can prosper in the current environment, analysts said. "Internet companies can't borrow as they don't have any assets which banks can use as collateral and don't have predictable cash flows," said Philip Chan, head of research at Shenyin Wanguo Securities.

"That's why techs can do well as they rely on cash-raising through placements."

One upcoming placement is that of Ltd, set to be the first Internet portal listed on the Growth Enterprise Market (GEM).

On Thursday the company said it was offering 428 million new shares in an IPO with dealing of the shares to start on March 1.

Investors were taking profit from market leaders on Friday so they could have cash to subscribe for the said Kitty Chan, fund manager at APC Investment Management Services Co Ltd. A number of other Internet-related or technology companies did well. Easy Concepts International Holdings Ltd soared 378.57 percent or HK$7.95 to HK$10.05 after it said two investors had agreed to buy a 78 percent stake in the company for HK$117.2 million and convert it into an Internet investment firm.

Chinese state-owned-enterprises listed in Hong Kong soared, with the H-share index jumping 7.93 percent to 389.05, as investors began to see these as value stocks.

"People are switching from blue chips to red chips, as they see red chips as undervalued and oversold," said Kitty Chan.

Shares of China-backed companies based in Hong Kong rose with the red chip index up 1.65 percent at 1,418.14

A total of 402 issues rose while 332 fell.-Reuters