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HK's HSI sheds 3.48 pct, Nasdaq spurs tech selloff

HONG KONG: Hong Kong's Hang Seng index suffered its fifth-biggest point drop in the past two years on Thursday as investors piled out of technology and telecoms stocks after warnings by top market gurus prompted a sharp Nasdaq fall.

The benchmark index fell 3.48 percent or 637.75 points to 17,458.62, near its lows of the day following a three-day slump on the technology-heavy Nasdaq.

It was the index' second day of declines in a row following record closes on Monday and Tuesday. While banks and developers held the market from further losses in the morning, by the afternoon the decline was broad-based with two stocks falling for each one that rose.

Turnover was a light HK$13.8 billion, much less than the daily average of HK$18.1 billion for the past three months.

"Futures expiring, the Nasdaq and rumours that the Tiger Fund will close down this on Friday led the market (down)," said Michael Liang, vice president of Asian equities at Daiwa Securities. Hong Kong technology stocks were battered after the Nasdaq suffered its third-largest point fall ever, when Templeton Asset Management's Mark Mobius suggested that recent volatility in the sector could be the start of a global sell-off.

Hong Kong's sell-off was compounded by US sources saying that Tiger Management LLC, the once high-flying hedge fund manager that roiled global markets with huge stock and currency bets, will close its flagship Jaguar fund on Friday to stem losses from ill-timed stock picks.

"This will affect the US market and in turn the Hong Kong market will be affected," said Liang. March Hang Seng index futures also expired on Thursday, eliminating the need for traders with long positions to support the big index heavyweights, Liang said.

The so-called "TMT" stocks telecoms, media and technology took the brunt of Thursday's battering.

China Telecom (Hong Kong) Ltd led the losses among the benchmark index, plummeting 9.0 percent or HK$6.75 to HK$68.00, accounting for two thirds of the Hang Seng's fall, according to Reuters 3000.

China Telecom, which was the most actively traded company on Wednesday, had risen around 59 percent this year before on Thursday's fall.

Hutchison Whampoa Ltd, which has extensive telecom operations, and Cable & Wireless, Hong Kong's dominant telecom carrier, followed closely behind.

Hong Kong's high-tech GEM index took the Nasdaq's slump particularly hard, hitting its lowest point since its launch last week when it fell to 897.35 10 percent below its base level of 1000. The GEM ended on Thursday at 899.74.

"Todays' market is driven by the trends in the US," said Jolyon Petch, head of Hong Kong research at ING Barings. "The seeds are being sowed for some more cautious assesment of these companies." Dragging the down the GEM index were recently-listed Internet companies such as hongkong.com Corp, tom.com Ltd and Sunevision Holdings Ltd which helped to fan the flames of Internet euphoria in Hong Kong.

"Internet stocks were hit the most as people are less convinced that they have a business model to make money," said Alan Hutcheson, head of research at Pacific Challenge Securities.

As fund managers were coming to the end of the fiscal quarter, they were taking a "close, hard look at the riskier ends of their portfolios," said Hutcheson. "They don't want to report a high position in Internet stocks as their trustees will go crazy."

Tom.com, which listed at the start of March and is the largest Internet firm on the GEM, has already slumped 30 percent from its high of HK$15.35 and some high-technology stocks are now trading below their issue prices.

Blue chip television programmer Television Broadcasts Ltd (TVB) was one media company that survived the TMT battering on Thursday, jumping on news that it will look at forming a new company with the goal of listing its Internet subsidiary TVB.COM on Hong Kong's Growth Enterprise Market (GEM).

TVB gained 1.0 percent or HK$0.75 to HK$73.00.

Interest rate-sensitive banks and developers failed to sustain their early upward momentum.

Looking ahead, analysts said they would be looking to see how the European and US markets fare later in the day, to see whether this tech sell-off was more than just a blimp.

April index futures tumbled 545 to 17,615. -Reuters