HONG KONG (XFN-ASIA) - Share prices closed sharply lower as China banks fell for a second day on concerns over share sales by strategic investors and commodity stocks tumbled after a big drop in crude oil prices overnight.
Steep falls on US and mainland bourses and profit-warnings by locally-listed companies, including Cathay Pacific Airways and Lenovo Group, also weighed on investor sentiment.
Lenovo, China's top personal-computer maker, plunged 26 pct after it said it expects to post a loss for its fiscal third-quarter ended December and that it plans to shed 11 pct of its global workforce.
Cathay Pacific slumped over 7.6 pct after the Hong Kong flag-carrier warned of 'disappointing' 2008 results due to lower revenue and fuel hedging losses.
Bank of China (BOC) lost over 8 pct after news that an entity controlled by tycoon Li Ka-shing sold 2 bln shares of the Chinese lender. A media report said Royal Bank of Scotland is also considering selling its holdings in BOC.
China Construction Bank (CCB) slipped more than 4.4 pct, extending its 8.7 pct fall yesterday, after Bank of America cut its stake earlier in the week.
China telecom firms saw continued profit-taking after Beijing issued long-awaited 3G licenses yesterday.
The Hang Seng index closed down 571.55 points or 3.81 pct at 14,415.91, off a low of 14,334.15 and high of 14,755.81. The index has shed 7 pct since yesterday.
Turnover was 55.52 bln hkd.
'Our market has been overbought of late, driven mainly by unsubstantiated hopes that the global economy will recover faster than what many analysts had expected,' said Ben Kwong, chief operating officer at KGI Securities.
'It appears that scores of big players have misled many retail investors into believing this 'faster-recovery' story and they have now sold stocks in a big way for quick profit at the expense of small players,' he said.
Kwong said there is no evidence yet that the global economy will recover anytime soon.
On the contrary, there has been more negative economic data and poor corporate earnings news around the world, pointing to extended weakness in major economies, he said.
US corporates laid off 693,000 jobs in December, up sharply from a revised 476,000 job losses in November and far more than what economists had estimated, a private-sector jobs report released overnight showed.
The report raised fears that non-farm payrolls data, due on Friday, will also be grim.
'It may be fair to say that there's a bubble in the rally that we've seen since the start of the year,' Kwong said, referring to the market's strong gains in the first two sessions of 2009.
Dealers said profit-warnings by Intel in the US and Cathay Pacific and Lenovo here have heightened worries about corporate earnings.
Microchip maker Intel issued on Wednesday its second revenue warning on the fourth quarter, saying demand for personal computers was worse than anticipated previously. The US firm said it will not be able to meet even its previously lowered fourth-quarter revenue forecast, made in November.
Cathay Pacific fell 0.74 hkd or 7.62 pct at 8.97 after it warned that its 2008 earnings will be disappointing due to weak revenues and hedging losses.
Lenovo plunged 0.67 hkd or 25.97 pct to 1.91 after announcing that it is likely to post a loss for the December quarter and that it will lay off 2,500 employees to cut costs.
It said unprecedented global economic challenges have reduced demand for personal computers.
The company said it will take a pre-tax restructuring charge of about 150 mln usd for the financial year ending March 2009, which would be largely reflected in fiscal fourth-quarter results.
Matthew Kwok, research head at Tanrich Securities, said he is bearish on the near-term prospects for the local bourse, expecting more profit warnings as the reporting season draws near.
China banks were hit by fears of more share sales by key investors following Li Ka-shing's sale of BOC shares and Bank of America's sale of some stake in CCB.
BOC lost 0.18 hkd or 8.41 pct at 1.96 after Li Ka-shing Foundation, the charity arm of the tycoon, sold 2 bln shares of the Chinese lender at 1.98-2.03 hkd each.
Meanwhile, the Financial Times reported that Royal Bank of Scotland -- another strategic shareholder in BOC -- is considering selling its 2 bln stg stake in the bank amid a scramble by foreign investors in mainland banks to cash in their holdings.
CCB shed 0.18 hkd or 4.43 pct at 3.88. Bank of America earlier this week sold 5.62 bln shares of CCB at 3.92 hkd each, a big discount to its closing price on Tuesday.
ICBC fell 0.27 hkd or 6.82 pct to 3.69 on worries of possible sale by strategic investors after a share lock-up period expires at end-April.
China Merchants Bank dropped 1.04 hkd or 7.06 pct to 13.70 and Bank of Communications lost 0.29 hkd or 4.9 pct at 5.63.
'The decision of several strategic investors to sell shares in some China banks... served as a convenient excuse for big institutions to sell down mainland lenders,' Kwong of KGI Securities said.
Mainland insurers were also sharply lower on profit-taking after recent gains.
Ping An slumped 2.55 hkd or 6.02 pct to 39.80, PICC P&C fell 0.39 hkd or 8.97 pct to 3.96 and China Life lost 0.80 hkd or 3.27 pct at 23.65.
Among other blue chips, HSBC was down 1.0 hkd or 1.33 pct at 74, Hong Kong Exchanges & Clearing fell 5.35 hkd or 6.38 pct to 78.50 and Hutchison Whampoa was down 1.50 hkd or 3.51 pct at 42.55.
China telecom operators saw continued profit-taking after Beijing issued 3G licenses yesterday to China Mobile, China Unicom and China Telecom.
China Mobile fell 2.45 hkd or 3.12 pct at 76, China Unicom tumbled 0.68 hkd or 7.4 pct to 8.51, and China Telecom lost 0.17 hkd or 5.61 pct at 2.86.
Oil producers fell sharply as crude oil prices tumbled more than 12 pct overnight following news of larger-than-expected energy stockpile buildup in the US.
The benchmark contract, light sweet crude for delivery in February, dropped 5.95 usd to settle at 42.63 usd a barrel on the New York Mercantile Exchange.
CNOOC dropped 0.53 hkd or 6.71 pct to 7.37 and PetroChina slumped 0.39 hkd or 5.23 pct to 7.06 while refiner China Petroleum & Chemical Corp (Sinopec) also lost 0.30 hkd or 5.98 pct to 4.72.
Among metals and mining firms, Aluminum Corp of China (Chalco) slumped 0.47 hkd or 9.31 pct to 4.58, Jiangxi Copper fell 0.91 hkd or 12.43 pct to 6.41, Zijin MIning slipped 0.39 hkd or 8.19 pct to 4.37 and Angang Steel lost 1.18 hkd or 12.22 pct at 8.48.
Coal firm China Shenhua fell 0.62 hkd or 3.38 pct to 17.70.
The Hang Seng China Enterprises index ended down 484.66 points or 5.88 pct at 7,760.02.
(1 usd = 7.8 hkd)
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