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HK stocks end slightly lower, Fed outweighs Taiwan

HONG KONG: Hong Kong stocks ended modestly lower on Tuesday as news of Taiwan lifting a ban on direct trade with China was unable to outweigh jitters over a likely US rate hike and the value of high-technology stocks.

"Nobody wants to be too brave right now," said Michael Liang, vice president of Asian equities at Daiwa Securities. "People are waiting to see what happens with the US interest rate, the Nasdaq correction and Taiwan."

After opening higher and then falling as low as 16,896.70 in another day of volatile trading, the benchmark Hang Seng Index ended on Tuesday down a mere 0.20 percent or 34.48 points at 17,199.98.Banks and high-tech stocks tumbled following the Nasdaq's third-largest point drop on Monday and ahead of a likely quarter-point hike in interest rates in the US

"The index is breaking for a while, waiting for more news from the FOMC (Federal Open Market Committee)," said Ben Kwong, associate director at KGI Asia Ltd.

The FOMC meets later on Tuesday and is expected to hike rates for the fifth time since mid-1999 as the US government seeks to curb inflation while the economy keeps surging.

Hong Kong's largest bank, HSBC Holdings Plc, weighed down the index, falling 1.13 percent or HK$1.00 to HK$87.50.

Hong Kong's Nasdaq equivalent, the new tech-heavy GEM index followed its US barometer down, plummeting 6.94 percent.

"If high-tech stocks are going down worldwide, people take a hard look at business models," said Liang.

Tom.com Ltd, which listed on the GEM at the start of the month, slumped 6.3 percent or HK$0.70 to HK$10.50.

Sunevision Holdings Ltd, the Internet arm of developer Sun Hung Kai Properties Ltd, fell 4.9 percent to HK$15.30.

Blue chip Sun Hung Kai followed Sunevision downwards, falling 2.9 percent or HK$2.00 to HK$66.75. Pacific Century CyberWorks Ltd (PCCW) Asia's largest Internet firm outside Japan, skidded 6.4 percent or HK$1.30 to HK$19.10 despite posting net profit of HK$346.81 million for 1999 versus a HK$62.04 million net loss in 1998.

"PCCW's deal with Hong Kong Telecom (C&W HKT) is still in progress but after the takeover it's not going to be perceived as an original Internet stock but as a Hong Kong-based telecom company," said Liang.

joined the sell-off, slumping 5.22 percent or HK$1.15 to HK$20.85.

But red chips continued to climb after Morgan Stanley Capital International (MSCI) added 15 China-linked companies to their China Free Index on Sunday.

China's largest personal computer maker, Legend Holdings Ltd surged 4.59 percent to HK$13.65 while two other new index consitutents, Founder (Hong Kong) Ltd and developer Top Glory International Holdings Ltd added to on Monday's gains.

China-backed companies were further lifted late in the day after Taiwan's parliament dropped a five-decade-old ban on direct trade and transport links between the island and mainland China. Hutchison Whampoa Ltd and its parent Cheung Kong (Holdings) Ltd provided some sparkle to the blue chips amid optimism for their full-year results due on Thursday.

Developer Cheung Kong rose HK$3.50 to HK$108.00 while its subsidiary Hutchison Whampoa Ltd gained HK$4.50 to HK$135.50.

Looking ahead, high-techs were likely to stay under selling pressure with thin support as investors stay on the sidelines, said Kwong.

Total turnover was a slim HK$11.6 billion, slightly higher than on Monday's HK$10.1 billion but still short of the January daily average.

A total of 168 issues rose while 527 fell. -Reuters