Selling hits prices after Lu confuses

CONFUSION over remarks by China's most senior official on Hongkong affairs, Mr Lu Ping, helped trigger profit-taking yesterday, sending the Hang Seng Index down 82.69 points.

Volume fell for the third consecutive day, to $2.82 billion. However, discounting the exceptional trade in Denway Investment, yesterday's turnover was higher than Monday's.

Denway was yesterday's worst performing share.

The gap between the February index futures contract and the cash index closed slightly, but remained at 29 points, with the contract closing tomorrow.

None of the Hang Seng Index stocks rose, although finance stocks held their ground best.

Dairy Farm was again hit hard by continuing fears of an adventure in Britain following the increase of its stake in supermarket chain Kwik Save.

The market had risen 6.4 per cent in six trading days. One dealer said some investors appeared to be seeking an excuse to take profits.

Reports on Mr Lu's comments, in which he both confirmed and denied talks with Britain about Governor Chris Patten's election proposals, were the trigger some were looking for.

The index took a double dip, falling 40 points through 6,200 in early trade, then stabilising. The opening quote of 6,227.8 was the day's high.

By 11 am the index was back above 6,200, but strong selling pressure re-emerged and prices were marked down, the slide continuing after lunch to the intra-day low of 6,138.19 late in the day.

The index closed at 6,149.19.

February index futures closed at 6,178, down 88. The premium to the cash index was 29, against the 34-point premium on Monday.

However, the March contract continued to indicate that investors retained mild optimism, closing at 6,193.

Futures volume was high at 10,142 as February positions were rolled over into March.

Dairy Farm suffered the worst slide in the Hang Seng Index, falling 70 cents or 6.1 per cent to $10.70 on a turnover of $40 million.

Also unpopular was Jardine Matheson, down $1.25 or 2.4 per cent to $49.75 after its extraordinary rise of 18 per cent in the past six trading days. Trade was strong at $128.4 million.

HSBC Holdings had the day's highest turnover of $201.6 million, but ended unchanged at $64.

Outside the index, Denway Investment, down 15 cents or 6.8 per cent to $2.05, was not the only new issue drawing attention.

Peace Mark Holdings, first listed on Friday, appeared to set a record by posting a notice on unusual share-price movements after just two days of trade.

Company finance director Napalex Li Cham-keung dismissed rumours of big players manipulating his company's share price, saying: ''We are not aware of anything that could have happened'' and that no large trades had been reported.

Peace Mark's shares closed up seven cents at 95 cents. Its 7.9 per cent rise was the day's largest and followed Monday's fall of 12 per cent.

Jinhui Holdings had the day's second-highest rise, 6.6 per cent.

After trading closed the company said it was disposing of assets to ''an independent third party'' on ''normal commercial terms''.