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SCMP Reporter

Speculation over interest-rate cuts sparked a rally in property shares yesterday but that was not enough to stop Hong Kong stocks drifting lower.

The Hang Seng Index slipped 0.32 per cent to 15,230.22 points.

'The market went to two extremes. We had buying interest in the property market but the rest of the market suffered, especially [telecommunications] plays,' Tai Fook Securities research head Marco Mak Tak-kwong said.

The commerce and industry sub-index, which includes telecommunications plays, fell 1.48 per cent.

The properties sub-index rose 2.91 per cent after a report released on Friday from Bear Stearns said there was a 60 per cent chance of another round of interest-rate cuts this week.

This would mark the second inter-meeting cut this year as the United States Federal Reserve attempts to head off the slowing of the US economy.

Nevertheless, analysts were sceptical about the likelihood of an early rate cut given inflationary economic data coming out of the US.

'I think it's quite unrealistic to expect the Fed to make a decision to cut interest rates any time soon,' Mr Mak said.

'If the hopes on interest-rate cuts are the driving force behind the property stocks, I'd doubt whether this strength [could] be sustained.'

Banking stocks fell through the day before the afternoon release of full-year results from Hang Seng Bank and HSBC.

The finance sub-index closed down 0.58 per cent, led in part by HSBC which lost 0.42 per cent to end at HK$116.50.

'I'd definitely choose property stocks over the banks,' said Ryan Fong, e2-Capital Securities vice-president of institutional sales.

'Hong Kong properties usually benefit more than people expect on an interest-rate easing cycle and banks have already moved up quite substantially.'

HSBC's slightly disappointing results and gloomy comments from chairman Sir John Bond prompted Tanrich Asset Management director Kennis Leung to urge caution.

'As John Bond mentioned, the motor of the global financial market, the US economy, is slowing down,' she said.

'We expect [HSBC] earnings figures to be even lower in the coming year after these comments from the chairman.'

Mainland broker Shenyin Wanguo showed no signs of running out of steam. With the reopening of the Chinese B-share markets tomorrow, the stock surged 16.16 per cent to $1.15.

Mr Fong noted the stock had benefited enormously from news the B-share markets were to be opened up to mainland punters.

However, Mr Fong said Shenyin's extraordinary 167.44 per cent jump in only one week was unjustified and the stock was too speculative for major institutional players to consider going near.

'It's another case of 'China fever'. I doubt it'll drop back to 40 cents but a lot of institutional investors would rather play the safer names like China Resources or China Everbright.'

Davidw@scmp.com

Key Figures

Close:15,230.22 (- 50.34)

Turnover: $10.14 bln

Volume: 7.86 bln shares

Day's high:15,304.66

Day's low: 15,177.8

Advanced: 339

Declined:301

Unchanged: 425

February futures:15,107 (- 165)

March futures: 15,107 (- 163)



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Rate-cut talk boosts property issues but financial plays weaken