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HK stocks end lower after Wall Street fall

HONG KONG: Hong Kong stocks fell on Monday for a third day, taking a cue from on Friday's dive in US stocks as investors heeded Federal Reserve Chairman Alan Greenspan's warning that interest rates will probably rise.

The benchmark Hang Seng Index finished down 1.67 percent or 276.79 points at 16,322.37, a fall of 721.02 points in the past three trading days.Turnover was HK$21.71 billion, down from Friday's HK$27.34 billion on a day of broad-based declines. For every two stocks that rose, five fell.

Interest rate-sensitive banks and developers, which suffer when borrowing costs are hiked, led the market lower after their Wall Street counterparts skidded on Friday.

US stocks slumped as investors ignored news that January consumer prices rose less than expected and instead focused on Greenspan's warning that a substantial rise in interest rates may be needed to cool the economy.

"It's all Wall Street-related today," said Geoff Galbraith, deputy head of institutional sales at Dao Heng Securities.

"The fall is to be expected with Wall Street coming down so much on interest rate concern."

Rises in US interest rates tends to be followed by Hong Kong because the territory's currency is pegged to the US dollar.

The Hang Seng finance index fell 1.82 percent while the property index dropped 1.90 percent. Hong Kong's largest bank HSBC Holdings Plc led blue chips down, tumbling 1.91 percent or HK$1.75 to HK$89.50. Dao Heng Bank Group Ltd suffered the biggest percentage fall among the banking group, slumping 5.95 percent or HK$1.90 to HK$30.00.

Cheung Kong (Holdings) Ltd led developers down, skidding 2.40 percent or HK$2.50 to HK$101.50, followed by Sun Hung Kai Properties Ltd which fell 1.04 percent to HK$71.25.

Cheung Kong's subsidiary Hutchison Whampoa Ltd lost 2.05 percent or HK$2.50 to HK$119.00.

In addition to the interest rate concern, these blue chips fell as investors took profit from their recent record highs, traders said.

"There's some blue chip profit-taking on stocks that have outperformed the market," said Andrew To, sales director and head of research at Tai Fook Securities.

China Telecom (Hong Kong) Ltd which hit a high of HK$72.00 on February 14, finished down HK$0.75 at HK$57.75. In mid-afternoon Cable & Wireless (C&W HKT) was one of only two Hang Seng stocks in positive territory, as investors continued to speculate on its potential merger with Pacific Century CyberWorks Ltd (PCCW) or Singapore Telecommunications. But at the close was down HK$0.10 at HK$25.55.

By the end of Monday, no Hang Seng stocks were higher.

Internet firm PCCW said on Monday it was still in talks with Cable & Wireless Plc about a possible merger between PCCW and but no agreement had yet been reached.PCCW fell 5.51 percent or HK$1.40 to HK$24.00, the third day in a row it has fallen after hitting a high of HK$28.50 on February 15 when it was in the midst of the merger mania. Adding to the market's losses were Cheung Wah Development Co Ltd and Leading Spirit High-Tech (Holdings) Co Ltd.

Cheung Wah, the most actively traded stock, dropped HK$0.65 to HK$13.60. The company said on Monday its directors had agreed to place 100 million existing shares they held with institutional investors at HK$13.55 each, a discount to the closing price of HK$14.25 on Thursday.

Leading Spirit, the market's third most active stock, fell 28.39 percent or HK$0.23 to HK$0.58 when trading resumed on Monday.

Leading Spirit said on Monday it reached an agreement in principal for an option to buy a 30 percent equity interest in Fujian EastNet, a Chinese cable television network..

A few Internet-related companies bucked the broader market trend. Easy Concepts International Holdings Ltd was a major gainer, jumping 25.87 percent or HK$2.60 to HK$12.65.

On Friday the property developer said two new investors agreed to acquire a stake in the company for HK$117.2 million and convert it into an Internet investment company.

EasyKnit International Holdings Ltd, which has a stake in Easy Concepts, soared 94.67 percent or HK$1.15 to HK$2.37.

Financial services group Pacific Challenge Holdings Ltd surged 127.08 percent or HK$3.05 to HK$5.45 after it said on Monday its substantial shareholders had agreed to sell a 30 percent interest in the company to Internet investor E1 Media Technology Ltd.

For the overall market, investors were likely to remain cautious ahead of the US markets reopening on Tuesday, said CK Yang, sales director at Core Pacific-Yamaichi Securities.

"There may be some consolidation while visitors wait for further direction from Wall Street," said To, but he added that the market has support at 16,000 to 16,300.-Reuters