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HK stocks end lower, banks down, but up

HONG KONG: Hong Kong stocks ended down on Monday after hitting a record high, with interest in a second bid for Cable & Wireless unable to offset tumbling bank, property and utility shares after interest rates rose.

The benchmark Hang Seng Index closed lower for the first time this month, dropping 1.1 percent or 191.34 points to 17,188.96, after reaching an intraday record of 17,939.27 was one of only three Hang Seng Index stocks that rose on Monday, with its 21.9-percent jump holding the Hong Kong market from further falls on a day when 277 issues rose and 453 fell on turnover of HK$28.2 billion, down from Friday's hefty HK$32.8 billion.

"Last on Friday the Dow Jones fell 200-odd points and selling of technology stocks in the US triggered profit-taking with the exception being HongKong Telecom due to the possible acquisition," said George Chan, senior analyst at Kwai Hung Securities.

C&W HKT's rise on Monday was fuelled by suitor Pacfic Century CyberWorks Ltd (PCCW) arming itself for a potential bidding war with Singapore Telecommunications Ltd (SingTel) for control of the Hong Kong-based telecoms carrier.

The most actively traded stock on Monday, surged HK$4.75 to HK$26.40 after hitting a record of HK$27.65.

The telecoms carrier's shares have gained almost 50 percent since Friday when talk of a PCCW bid began, and reverses a slide in its share price since merger talks began with SingTel last month.

A spokesperson for SingTel said talks between SingTel and were still continuing. Sources in Singapore familiar with those talks said on Monday SingTel was open to the idea of working with a third party in its efforts to merge with launched a share placement in Hong Kong on Monday to raise up to US$1.01 billion in cash for the expected merger proposal with Hong Kong's dominant carrier, which it said would involve both cash and PCCW's own stock.

Trading in PCCW shares has been suspended since on Friday morning, where they closed at HK$24.65.

A soaring contrasted with losses among banks, developers and utility companies, after the Hong Kong Association of Banks (HKAB) raised interest rates a quarter point on Friday and after investors heeded tumbling US stocks.

"People are coming back to the interest rate issue as Wall Street is coming down," said Alan Pau, associate director of South China Securities.

High interest rates hurt banks' profit margins, make loans more expensive for customers and bonds more attractive than stocks for investors.The Hang Seng financial, property and utility sub indexes skidded lower on Monday, following US stocks down.

Hutchison Whampoa Ltd and its parent Cheung Kong Holdings Ltd, which hit record highs last on Friday on speculation they could be involved in a bid for both tumbled.

Hutchison, whose deputy chairman is PCCW's Richard Li, slumped 7.39 percent or HK$10.50 to HK$131.50 while Cheung Kong fell 4.58 percent or HK$5.50 to HK$114.50.

China Telecom (Hong Kong) Ltd, which also hit a record last week on the telecom euphoria, fell 2.58 percent or HK$1.75 to HK$66.00.HSBC Holdings Plc led blue-chip banks down, followed by Dao Heng Bank Group Ltd. tumbled 3.31 percent or HK$3.00 to HK$87.50.

Slumping utility stocks pushed down Cgina plays. The red-chip index ended the day down 4.49 percent at 1,407.04 points, and the H-share index fell 4.60 percent to 350.21 points.

February index futures ended down 610 points at 17,220.-Reuters