Hong Kong's stock index plunged over 6 percent in early trade yesterday, tracking Wall Street's sharp losses overnight. The blue chip Hang Seng index fell 717.74 points, or 5.15 percent, to 13,221.35 points. AP

Hong Kong shares nosedived 5.15 percent to a two-week low yesterday, as US Treasury abandoned the plan to buy devalued mortgage assets and Hong Kong Exchanges & Clearing (HKEx) posted lower-than-estimated earnings.

HKEx, Asia's biggest listed bourse operator, shed 7.88 percent, or HK$5.7, after the company reported a 43 percent decline in net income from July to September, dragged by the sluggish market turnover.

The stock price has already plummeted 70 percent this year, its worst annual performance since 1974, due to the 52 percent slump in the Hang Seng Index (HSI). It ended yesterday's trading at HK$66.6.

Continuing its three-day loss, the benchmark HSI closed down 717.74 points at 13,221.35, its lowest close since Oct 29. Mainboard turnover slightly soared to HK$51.8 billion from HK$47.2 billion on Wednesday.

Redford Securities head of research Kenny Tang said the benchmark index tended to decline after the previous rally, while it also showed hesitation in breaking through the 15,000-level.

"The next supporting level for the index will be around 12,500," Tang said.

Europe's largest bank HSBC Holdings tumbled 6.26 percent, or HK$5.4, the biggest drag on the benchmark index, as the US Treasury refrained from using the $700 billion bailout fund to purchase bad mortgage debt from lenders. The shares ended the day at HK$80.85.

Patrick Shum, executive director at Karl Thomson, predicts shares of HSBC Holdings may remain gloomy, and it may drop to around HK$65 to HK$66 by the end of this year.

"Annual results of HSBC may not perform well, while its earnings in the North American market have also booked a loss," Shum said.

Among the 42 members of the benchmark index, CITIC Pacific was the only one to record a jump yesterday. The shares surged 9.24 percent, or HK$0.56, to HK$6.62, after its parent company said it would buy $1.5 billion worth of convertible bonds from the company and assume HK$10.4 billion of its currency losses.

"As investors have lost their confidence in the company, it is not easy for CITIC Pacific to rise further," said Shum, who expects the stock to fluctuate from HK$6 to HK$7.

Echoing the slump in the benchmark index, the China Enterprise Index of top locally listed mainland companies fell 4.8 percent to 6,795.58, led by a 4.71 percent drop in China Construction Bank. The shares closed down HK$0.2 to HK$4.05.

Shum said the H-shares performance may show a rebound in the second half of 2009, as it takes some time for the 4-trillion yuan stimulus package to take effect.

"The central government's rescue measures are for long term. They won't lift up the H-shares right afterwards," Shum added.

(HK Edition 11/14/2008 page2)