HONG KONG: Hong Kong stocks dropped after China central bank adviser Fan Gang said the mainland is among the regions facing risks of market bubbles.

The Hang Seng Index slid 0.3 percent to close at 22,840.33, reversing a gain of as much as 0.8 percent. The gauge has doubled its value since this year's low on March 9 as governments and central banks globally tried to stimulate their economies through spending and looser monetary policies.

"Authorities seem to be considering walking away from their expansionary policies to go back to normal ones and investors are wary of those moves," said Yoji Takeda, who manages the equivalent of $1.1 billion at RBC Investment (Asia) Ltd in Hong Kong.

The Hang Seng China Enterprises Index, which tracks so-called H-shares of mainland companies listed in Hong Kong, fell 0.3 percent to 13,688.01.

The Hang Seng Index has soared 59 percent in 2009, the third-steepest surge among the world's 10 biggest markets after the mainland and Brazil. Beijing is spending 4 trillion yuan ($586 billion) on stoking its economic growth, resulting in an 8.9 percent expansion of gross domestic product in the third quarter from a year earlier.

Shares in the Hang Seng Index trade at 156 times estimated cash flow for this year, compared with 8.9 times for the Shanghai Composite Index and 9.6 times for the Standard & Poor's 500 Index in the US, according to data compiled by Bloomberg.

In the day's trading, Hang Lung Properties lost 3 percent to HK$30.95, while China Overseas Land & Investment Ltd dropped 2.1 percent to HK$17.10. Sino Land Co fell 1 percent to HK$13.94.

Bank of China Ltd declined 2 percent to HK$4.83 and BOC Hong Kong (Holdings) Ltd lost 1.2 percent to HK$19.24.

China Mobile advanced 2.5 percent to HK$76.15 and was the biggest gainer on the Hang Seng Index. Chairman Wang Jianzhou said the carrier will have 3 million subscribers for its third-generation service by the end of this year. The company had 1.66 million 3G users at the end of September, according to China Mobile's website.

BYD Co, the mainland electric-car maker backed by Warren Buffett, tumbled 6 percent to HK$64.65, the biggest decline since October 30. Chardan Capital Market LLC advised investors to sell the stock yesterday after a fivefold jump in the price as electric vehicles take years to penetrate a market.

Bloomberg News

(HK Edition 11/19/2009 page4)