Further monetary tightening on the mainland, sky-high crude prices and a listless Wall Street performance over the holiday weekend spelled doom for the Hong Kong stock market yesterday.

The Hang Seng Index (HSI) gave up 1,026 points, hitting a 10-week low as trade resumed after the long weekend.

The 4.21 percent loss was at least twice as bad as some analysts' predictions, and it dropped the HSI to 23,375.

Stocks plummeted on the heels of a central government decision to raise the reserve-requirement ratio a full percentage point.

The move, which dispelled earlier hopes that the government might loosen its grip on the economy after the Sichaun earthquake, pushed mainland banks down yesterday. China Construction bank and the Industrial and Commercial Bank of China both fell almost 5 percent, while China Life fell more than that.

The severe losses on the Hong Kong side mirrored those of their Shanghai A-share counterparts, which fell a collective 8 percent.

First Shanghai Securities Strategist Linus Yip is telling retail investors to leave the market and cautiously observe it before getting back in.

"The market conditions are very weak at the moment and can be dangerous for investors," Yip said.

The frail global market conditions, coupled with the lack of encouraging news, means that the Hong Kong stock market will remain on the soft side in the near term, he said.

The impetus for capital to enter the market is poor, he added.

"The absence of stimulating news on the Hong Kong bourse could be reflected in the low turnover," he said. "And with the lower influx of capital into the stock market, a robust rebound in the near term is less likely."

Turnover on the mainboard yesterday was HK$82 billion.

Also, the surging oil prices continue to haunt the performances of fuel-related stocks. PetroChina and Sinopec both skidded more than 5 percent to close at HK$10.40 and HK$7.76, respectively, after the price of crude hit $135 a barrel.

However, Prudential Brokerage Associate Director Kingston Lin said the Hong Kong market might be able to regain some of the losses this week.

"The mainland is due to release CPI figures this week," he said. "If inflation is better than expected, the local bourse will see a healthy rebound."

(HK Edition 06/11/2008 page2)