20000105

HK stocks close lower, eroded by Wall Street

HONG KONG: Hong Kong stocks closed lower on Tuesday, dragged down by losses overnight on Wall Street where blue chips plunged and benchmark bond yields rose.

The Hang Seng Index closed down 296.81 points or 1.71 percent at 17,072.82. Turnover was HK$18.93 billion, up from HK$18.03 billion on Monday.

Despite the blue chip index's weakness, advances outpaced declines by 362 to 324, with 227 issues unchanged.

Traders said they expected the market to retrace after hitting a high on Monday and after a substantial dip in the Dow Jones industrial average overnight.

"There's not much driving the market, just Wall Street (and) some profit-taking," said Vickers Ballas sales director Antony Mak. The Dow lost 1.21 percent overnight and the benchmark 30-year US Treasury bond yield rose to its highest level since September 1997 after an influential strategist predicted the Federal Reserve would push short-term interest rates up by one percent this year. The US Federal Open Market Committee (FOMC) meets on February 1 and February 2 amid fears it would be more inclined to raise rates, having boosted liquidity late last year and refrained from raising rates because of Y2K fears. Analysts said the Hong Kong market's most recent surge was underpinned by heavy buying of market heavyweight China Telecom (Hong Kong) Ltd and was not broadly based.

"The other blue chips didn't attract a lot of buying interest (on Monday)," said Mansion House Securities research head Stanley Ng.

China Telecom was down HK$1.25 or 2.34 percent at HK$52.25 as investors took profit on news of a partnership with US Internet services and network company GRIC Communications Inc.

Ng said many institutions had held back from buying blue chips recently, expecting a correction after a series of record-breaking runs by the market in recent weeks.

Blue chips were largely ignored by investors, with only five blue chips among the 20 most actively traded stocks. -Reuters