Shares in Cable & Wireless HKT defied expectations that the blue-chip counter would go out with a bang on its last solo trading session yesterday. Instead, it plunged 11.64 per cent to HK$16.70 by day's end. At the same time, shares in Pacific Century CyberWorks - set to merge with HKT on August 17 - lost a little less, 7.91 per cent, to HK$16.30. Some analysts blamed the losses on profit-taking and panic. Others said it was a technical adjustment before HKT's removal from the Hang Seng and Morgan Stanley Capital International (MSCI) indices. Sources close to the Tracker Fund said it was one of the day's sellers. Both stocks had been on a run and many expected CyberWorks to see support through to the HK$18.60 level at which shareholders of HKT would have greater incentive to take the all-share takeover. Instead, it now looks as though the mixed share-and-cash offer will be more favourable. Nomura Securities head of Greater China sales, Alan Chen, believes the performances could simply be a case of getting out while the going was good. 'A lot of people thought CyberWorks would trade up to HK$18.61,' Mr Chen said. 'Once lunch time came around, a lot of traders were scratching their heads and they were thinking why are these stocks down. So . . . you count your losses and you get rid of these [long] positions.' Some predicted a comeback for CyberWorks today as it savours its first day trading as a blue chip. They attributed yesterday's declines to derivatives traders dropping HKT as a hedging tool before its removal from the Hang Seng Index. Traders were warned in March that HKT would be removed from the index once the merger was complete. So, too, was the Tracker Fund - which brings to question another theory in the market yesterday. Brokers said the government fund sold 50 million shares in HKT through Lehman Brothers and bought 50 million CyberWorks shares from Merrill Lynch. They said there were book-cost advantages to wading into the market themselves rather than waiting to accept the new shares in CyberWorks. Neither the Tracker Fund nor its trustee bank, State Street, would confirm nor deny they were HKT stock sellers. Investors have a choice between accepting 1.1 new CyberWorks shares for each HKT share they hold or accepting HK$7.23 in cash and 0.7116 new CyberWorks shares. While the deal will not be completed until next week, CyberWorks replaces HKT in the Hang Seng Index from today. On an interim basis, its weighting will be equivalent to the full market capitalisation of CyberWorks plus about seven-tenths of every HKT share. By August 22, it will be trading based on the actual combined share capital of the merged entity. Based on the interim formula, Richard Li Tzar-kai's CyberWorks will be worth HK$349.9 billion ahead of the opening bell today. Not all were positive on the merger. 'I think the merged entity will perform poorly,' Prudential-Bache equities vice-president Michael Liang said.