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SCMP Reporter

Hong Kong stocks swung lower for a third day yesterday as rising interbank interest rates increased fears for the property market and corporate earnings.

 Chief Executive Tung Chee-hwa's comments that the Hong Kong dollar peg would never be broken also hurt sentiment as it indicated rates were set to remain high.

 Turnover remained subdued as many investors remained sidelined due to the interest rate uncertainty and caution about Wall Street.

 The Hang Seng Index fell 269.19 points to close at 10,412.56.

 Turnover edged up to $16.32 billion from Wednesday's $14.4 billion, but was still well down on last week's levels.

 Vickers Ballas Securities sales director Antony Mak Siu-leung said: 'We saw interbank rates shoot up - that has cast a shadow over the market.

 'There has also been concern that the Hong Kong Association of Banks could raise rates further when it meets [today].'  Interbank rates rose across the board amid fears speculators could be about to launch another attack on the Hong Kong dollar.

 The higher rates increased fears that corporate earnings and the property market were set to slump.

 Sentiment was also dampened by Mr Tung's assertion about maintaining the Hong Kong dollar peg.

 Brokers said the comments were negative for asset prices because the Government's determination to protect the peg at all costs could institutionalise high interest rates.

 Property stocks led the market lower as they have the most to lose from high interest rates.

 Great Eagle slipped 5.8 per cent to $11.30, New World Development shed 3.3 per cent to $26, and Cheung Kong fell 2.8 per cent to $52.

 Hongkong Telecom came under selling pressure and gave up the 5.7 per cent gain it made on Wednesday when it won a video-on-demand licence. The counter yesterday tumbled 5.4 per cent to $14.

 Mainland-related shares headed lower, with losses outstripping those of the blue chips.

 China Merchants led the sector down, the day after it raised $4.2 billion from a share placement. The stock slid 11.8 per cent to $11.85, falling below the $11.90 placement price.

 Brokers said the stock had become overvalued in the past week in anticipation of the placement.

 Brokers said the market was likely to remain under pressure in the short term but could pick up once the currency woes subsided.

 Nikko Securities investment adviser Kent Rossiter said: 'The market might slip below 10,000 on a couple of bad days, but we could put on 10 to 15 per cent by the year-end.' KEY FIGURES Close: 10,412.56 (- 269.19) Turnover: $16.32 bln Volume: 6.86 bln shares Day's high: 10,812.34 Day's low: 10,364.89 Advanced: 129 Declined: 636 Unchanged: 489 Nov futures: 10,400 (- 280) Dec futures: 10,475 (- 275) 



Interbank rates scare buyers