Index feels chill as IPOs blow in and oil edges up
Tokyo slump and prospect of US rate rise add to gloom as oil and property counters buck downbeat trend
Hong Kong stocks saw their biggest decline in a month yesterday as a swathe of new listings and rebounding oil prices sent shivers through the market.
Other chill factors included a possible 25 basis point interest rate rise in the United States next week and a sharp fall in the Japan stock market yesterday, brokers said.
Heavyweights China Mobile and HSB dragged the index down. China's largest mobile firm slid 2.91 per cent to $38.35, while the SAR's biggest lender inched down 0.72 per cent to $124.40. The two counters accounted for 62 per cent of yesterday's index loss.
'The market lacked direction after breaking the 15,000 level and a small-scale correction is good for further upside,' said Ricky Cheung, a fund manager at Phillip Asset Management.
The sharp decline of the Nikkei just before the market closed triggered a slump in the Hong Kong bourse in the afternoon session, he added. The Japanese stock market fell 0.82 per cent yesterday.
The Hang Seng Index finished the day at 14,990.61 yesterday, the first day in four it has dropped below the psychologically important 15,000 level, losing 168.21 points, or 1.11 per cent. But trading was more active than on Monday, with turnover of $20.76 billion, up from $16.53 billion.
However, brokers said a spate of new listings including Agile Property Holdings' $3.15 billion float and Prosperity Reit's $1.91 billion offering had in fact tightened market liquidity.
'Investors are looking for quick gains from new listings instead of buying blue chips, which see lacklustre support when they drop,' said Tung Tai Securities associate director Kenny Tang Sing-hing.
But not all blue chips were off investors' shopping lists. Oil stocks were saved by rebounding crude prices, which touched US$59.97 a barrel during regional trading hours on expectations that cold weather in the United States northeast would boost demand.
CNOOC and PetroChina managed to escape yesterday's correction, closing unchanged at $5.35 and $6.25 respectively. Sinopec edged up 0.7 per cent to $3.575.
New World Development was another star in the market, jumping 6.48 per cent to $11.50, the biggest index gainer of the day. Brokers said news that the Children's Investment Fund Management (TCI) had boosted its stake in the developer to 7.45 per cent had ignited investor hopes of more buying ahead.
New World China, a subsidiary of New World Development, advanced 3.7 per cent to $3.425.
Link Reit, in which TCI holds a 17.95 per cent stake, surged 2.6 per cent to a fresh high of $13.65 on turnover of $1.07 billion, making it the second most actively traded stock of the day.
In stark contrast, Johnson Electric Holdings, yesterday's worst index performer, slid 5.6 per cent to $7.50 after reporting on Monday a 24 per cent fall in interim profit to US$52.85 million due to big increases in raw materials costs.
In a research report, UBS cut Johnson Electric's 2006 earnings forecast by 37 per cent to US$118 million and said it did not expect earnings recovery until the second half of next year. The investment bank reduced the stock's target price to $8 from $9.50.
JP Morgan, which maintained underweight on the stock, predicted that Johnson Electric's margin would recover, but that the extent of recovery could disappoint investors as the incremental growth would come from lower margin trading and the company's consumer motors division.
The H-share index finished trading 45.71 points, or 0.89 per cent, lower to end the day at 5,064.93 yesterday.
