'Selling pressure is not too significant but investors were not keen entering into the market again on fears it might fall further as they see the US dollar heading up,' said Steven Leung Wai-yuen, a director with UOB Kay Hian.

The US dollar strengthened from 103.43 against the Japanese yen on Thursday to 103.65 yesterday.

'Also, there is no particular theme in the [secondary] market and therefore some investors turned to the [initial public offerings],' Mr Leung said.

Dynasty Fine Wines Group raised $675 million after it priced the 300 million share offering at the high end of the indicative range at $2.25 each on a strong response from investors. Sources said the retail offer was about 625 times subscribed while the institutional tranche was 80 times covered.

Tianjin Development, which will become a 46.5 per cent shareholder of Dynasty after the spin-off, fell 1.35 per cent to $3.65.

PCCW rose 2.65 per cent to an intraday high of $4.825 in morning trade after news that China Network Communications Group had agreed to pay $7.9 billion for a 20 per cent stake in the company. But the afternoon session saw a turnaround and the counter closed down 1.59 per cent at $4.625 - well below the acquisition price of $5.90 per share.

'Investors didn't take the news positively, as no concrete plans about investing in the mainland have been formulated,' Mr Leung said. 'The purchase does not give immediate earnings potential to PCCW, while there is a dilution in earnings per share.'

Standard & Poor's Asia-Pacific Equity Research downgraded its recommendation on PCCW from 'buy' to 'hold'. It has a price target of $5.10 for the stock.

'We estimate the transaction alone is EPS negative as the reduction of net interest expense would not be sufficient to offset the share dilution from the 1.34 billion new shares to China Netcom Group,' S&P said in a statement.

However, shares in China Netcom Group Corp Hong Kong rose 1.33 per cent to $11.35.

'The rally [in China Netcom] is not related to the purchase. Brokerages have been upgrading the stock on 3G prospects in China,' Mr Leung said.

The surge was also helped by the fact that China Netcom is replacing Lenovo in the FTSE/Xinhua China 25 index that tracks price movements of the mainland's top 25 companies.

In contrast, Lenovo lost 1.21 per cent to $2.025.

Kingway Brewery leapt 17.14 per cent to $3.075 after the firm said its controlling shareholder was in preliminary discussions with Heineken on the possibility of the Dutch brewer increasing its stake in the company. No further details were disclosed but the market was pinning hopes on a possible general offer with a significant premium.

Heineken currently holds 21 per cent in Kingway and any increase to beyond the 30 per cent threshold will trigger a general offer for all the shares. Heineken first invested in Kingway a year ago at a cost of $1.85 per share.

'This is quite possible, as Heineken would be interested only in obtaining a controlling stake in the company,' one local broker said.

K Wah Construction Materials surged 12.58 per cent to $8.05 before trading in the share was halted pending further clarification of the Macau asset injection plan.

The company said it had obtained approval from the Macau government for the injection of Galaxy Casino, one of only three casino operating licence holders in Macau, owned by chairman Lui Che-woo, into K Wah Construction Materials.

Henderson Land fell 1.4 per cent to $35.10. The developer said it was planning to diversify into Macau's property market by developing more than seven luxury residential projects.

China Southern Airlines fell 2.7 per cent to $2.70 after the mainland air carrier released its traffic data for last month which failed to impress investors.

Analysts were cautious over the near-term pressure on the share price as current market estimates for last year seemed too optimistic.