Hong Kong's share index dropped 2.4 percent yesterday to just off a 17-month low, as falling oil prices walloped commodity-linked stocks and mainland property shares slumped on more broker downgrades following grim August sales figures.

China Overseas Land tumbled 11.5 percent after its sales revenue in August fell 40 percent from July and 28 percent from the same month last year.

CLSA cut its rating on the stock to "sell" from "outperform" as it expected more aggressive price cutting in the property sector on the mainland.

Mainland's once red-hot property market has been faltering since the end of last year as the economy shows signs of slowing, cooling speculative purchases in high-end urban areas.

"We believe price correction in coming months will be substantially more than what we had originally expected," said Nicole Wong, an analyst with CLSA.

"We lowered our property price forecast to a 20-30 percent correction, from the previous 5-15 percent correction."

Guangzhou R&F Properties fell another 8.4 percent after Tuesday's steep losses after CLSA downgraded the company to "sell" from "underperform". Credit Suisse issued a warning about falling sales and property prices Tuesday.

The benchmark Hang Seng Index closed down 491.33 points at 19,999.78.

The index gave up almost all the gains made in Monday's 4.3 percent rally, triggered by the federal takeover of troubled US mortgage giants Freddie Mac and Fannie Mae, and is just shy of its 17-month closing low of 19,933.28 hit last Friday.

"The market tumbled following a string of broker downgrades amid hardly any fund flows," said Alex Tang, research director with Core Pacific-Yamaichi International.

"Locally-listed mainland shares did not even react to the mainland's surprisingly low inflation numbers because inflation is not the main concern now. Investors are more worried about earnings downgrades."

Earlier on Wednesday, data showed the mainland's consumer price inflation in August fell to a 14-month low of 4.9 percent.

Analysts see the forecast-beating drop in inflation opening a window for the mainland to raise energy prices and rest its aggressive credit tightening stance.

Mainboard turnover rose to HK$65.3 billion from HK$47.9 billion Tuesday.

The China Enterprises Index of top locally-listed mainland firms fell 3.1 percent.

Gold miner Zijin Mining plummeted 9.3 percent to an 18-month low of HK$3.89 after gold prices sank to their lowest in nearly a year as a stronger dollar and lower oil prices triggered a second day of heavy selling.

Retreating oil prices also sent Asia's largest oil and gas producer, PetroChina, down by 3 percent while offshore oil producer CNOOC dropped 5.4 percent.

"Funds are still fleeing the equity and commodity markets into bonds. The selloff in global commodity stocks will continue," said Castor Pang, a strategist with Sun Hung Kai Financial.

China Cosco, the nation's largest shipping conglomerate, plunged 13 percent to a 15-month low, tracking a 4.3 percent drop in the global freight index overnight.

The Baltic Dry Index, which gauges changes in the price of shipping commodities, fell for a 15th straight day amid deepening worries over a global economic slowdown.

Reuters

(HK Edition 09/11/2008 page3)