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HK stocks close lower sheds 12.3 pct

HONG KONG: Hong Kong stocks closed sharply lower on Wednesday, pulled down by a sell-off in Cable & Wireless and China Telecom and brokers said the correction was likely to continue.

The Hang Seng Index closed 325.85 points or 1.90 percent lower at 16,843.59, but well off its low for the day of 16,617.95. Turnover was a hefty HK$21.14 billion, up from on Tuesday's HK$12.97 billion. Profit-taking in Cable & Wireless, down 12.33 percent or HK$3.20 at HK$22.75, and in China Telecom, off 2.10 percent or HK$1.50 to HK$70.00, was expected but the magnitude of the sell-off was greater than many had anticipated.

"This is much worse than we had thought it would be. All the new economy stocks are also off," said Mary Beth McNamara, sales trader at ABN AMRO Asia Securities.

"With the Nasdaq up last night, we expected tech stocks to do well," McNamara added.

Overnight, the US Nasdaq market soared 118.84 points or 2.60 percent to a record 4,696.69.

The move lifted spirits in Tokyo where the Nikkei 225 advanced 122.15 points to close at 20,081.67, its highest close in nearly three years.

Other brokers said they were not surprised given the level of merger mania and euphoria surrounding the takeover bid by Pacific Century CyberWorks and the heights to which it lifted the telecom and tech sectors.

"Market valuations are at extremes that we haven't seen before or we haven't seen since 1997," said Morgan Stanley Dean Witter strategist Ajay Kapur.

"The general level of euphoria in this market is at extremely high level," Kapur added.Pacific Century CyberWorks closed HK$1.75 or 7.90 percent lower at HK$20.40 on heavy trade of HK$3.14 billion.

Brokers said there was uncertainty over the holding of Cable and Wireless Plc which would end up with a 20 percent in PCCW following the sale of subsidiary C&W HKT to PCCW.

Debut trading in the shares of Growth Enterprise Market (GEM) newcomer tom.com closed with the share at HK$7.75, well above its offer price of HK$1.78 per share.

"There is good buying interest for the stock and its strength is a bit out of my expectation," said Alex Wong, research manager at OSK Securities.

Turnover on tom.com, Cheung Kong group's pure Internet portal arm, was a hectic 303.08 million shares worth HK$2.61 billion.

Cheung Kong slid HK$2.50 or 2.4 percent to close at HK$101.00 and Hutchison Whampoa slipped HK$0.50 or 0.41 percent to HK$121.50.

Banking giant HSBC Holdings Plc was unchanged at HK$89.50. The bank on Monday reported a strong 21 percent rise in its 1999 pre-tax profits, to US$7.98 billion.

The March Hang Seng Index futures contract closed 320 points lower at 16,680.-Reuters