Hong Kong stocks fell yesterday, paring two days of gains, after HSBC Holdings Plc and Hang Seng Bank Ltd posted net income that missed analyst estimates.

HSBC fell 7.3 percent, its biggest single-day loss in three months, to a more than two-week low of HK$80.35, before ending at HK$80.55, down 7.04 percent.

Europe's biggest bank missed expectations for its 2009 earnings on rising bad debt. HSBC posted a net profit of $7.1 billion compared with $9.3 billion in 2008, and short of $11.4 billion forecast in a Thomson Reuters I/B/E/S poll. The earnings also missed the $7.76 billion median estimate of 12 analysts surveyed by Bloomberg.

"It used to be a firm market, but index heavyweight HSBC weighed down the entire market," said Alfred Chan, chief dealer at Cheer Pearl Investment.

"The market's next move will depend on whether HSBC can hold above the HK$80 level," he added.

Hang Seng Bank, a unit of HSBC, fell as much as 5.6 percent to a three-week low after the bank declared a lower dividend following a 6.2 percent drop in 2009 profit to HK$13.22 billion, against a consensus forecast of HK$13.29 billion. The bank ended down 5.13 percent.

Turnover rose to HK$72.10 billion ($9.3 billion) from Monday's HK$67.97 billion. Investors switched to mainland banking shares to avoid the underlying risk of exposure to the US and European markets, brokers said.

"Investors are not too confident about the global recovery," said Michiya Tomita, who helps manage $65 billion at Mitsubishi UFJ Asset Management Co in Hong Kong.

Hopes that Beijing's loose monetary policy would remain in place and more attractive valuations among mainland banks saw China Construction Bank, the country's second-largest bank by assets, end up 1.15 percent, and top lender ICBC finish up 1.56 percent, their highest closes in five weeks.

China Merchants Bank rose as much as 5.1 percent to HK$20.80, its highest since Jan. 8, before ending at HK$20.30, up 2.53 percent. The country's sixth-largest bank said it would launch a long-awaited rights share issue in Shanghai and Hong Kong this week to raise $3.2 billion.

The Hang Seng Index fell 0.72 percent or 150.82 points to close at 20,906.11 after rising 3.2 percent in the past two days.

However, the Hang Seng China Enterprises Index, which tracks the so-called H-shares of Hong Kong-listed mainland companies, rose 0.87 percent to 12,017.55.

Twenty two stocks rose and 17 shares fell on the 42-company Hang Seng Index.

Agencies

(HK Edition 03/03/2010 page3)