HK stocks see biggest drop in 6 years

By Hui Ching-hoo (China Daily)
Updated: 2007-11-06 10:10

Hong Kong shares suffered the largest single-day drop yesterday since September 2001 on fears that an investment scheme allowing mainlanders to buy Hong Kong stocks directly will be delayed.

The benchmark Hang Seng Index (HSI) nosedived 1526 points, or 5 percent, to 28942 following Premier Wen Jiabao's remarks over the weekend that the implementation of the pilot scheme should not hamper the stability of the Hong Kong share market.

News that central regulators have asked fund managers to cut their exposure to the Hong Kong market also added to the sluggish sentiment. Many investors found Wen's remarks and the news as reasons to sell off their shares.

Major market movers such as China Mobile, Sinopec and CNOOC saw heavy sell-offs. The turnover amounted to HK$158 billion.

The Chinese Enterprise Index, which gauges the performance of Hong Kong-listed mainland companies, dropped 1248 points, or 6.39 percent, to 18291.

China Mobile fell 6.96 percent to close at HK$141. Sinopec and CNOOC dropped 10.24 percent and 7.15 percent respectively.

The mainland's largest oil operator PetroChina made a strong debut in Shanghai yesterday. But its H shares dipped 8 percent to close at HK$18.

The mainland's major lenders all went down. Bank of China dropped 9.98 percent, or HK$0.49, to HK$4.57. China Construction Bank fell 6.17 percent to HK$7.75. Bank of Communications and China Merchants Bank lost 8.17 percent and 3.86 percent respectively.

Dually listed stocks, whose H shares have a large premium over their A-share counterparts, dropped substantially. Datang International Power fell 5.5 percent to HK$7.9 while Chalco dropped 7.39 percent to HK$19.54.

An analyst, however, said the drop was a due correction as Hong Kong shares have risen too fast in the past weeks.

Patrick Shum, chief portfolio strategist of Karl Thomson Securities, said: "The market thinks the pilot scheme will not become a reality in the short run. Investors just used Wen's remarks as an excuse to sell off their stocks.

"The moderate transaction volume shows investors are not very pessimistic about the outlook. The drop is a temporary correction rather than a bearish signal. We see the market is able to rebound at the 28500 level."

(For more biz stories, please visit Industry Updates)

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