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The Hang Seng Index slips after the developer raises concerns over share dilution

Property plays led Hong Kong stocks lower yesterday after Henderson Land placed  $3 billion in shares, prompting fears other developers would follow with issues of their own and dilute earnings.

The Hang Seng Index finished 10.56 points or 0.09 per cent weaker at 11,723.92.

Turnover, however, remained strong at $17.51 billion as overseas institutions continued to move funds into the market.

Henderson's placement of 92.44 million shares - at a 7.02 per cent discount to Monday's closing price - put pressure on other companies in the sector.

The market had been hit by Henderson Land's  share placement  and by the fact that many property companies had exceeded their net asset value, making  profit taking  inevitable, said Tung Tai Securities associate director Kenny Tang Sing-hing.

Henderson Land dropped 8.02 per cent to $32.10 - its biggest one-day loss for five years and below its placement price of $32.45.

Rivals Sun Hung Kai Properties declined 2.64 per cent to $64.50 and Cheung Kong fell 1.69 per cent to $65. The properties sub-index fell 2.97 per cent.

Property and aviation conglomerate Swire Pacific, the company behind some of Hong Kong's biggest retail developments, shed 5.41 per cent to $48.

UBS property analyst Franklin Lam said the consolidation was to be expected but  the developers' fundamentals remained strong and they would continue to rise in the near term.

'There is so much liquidity in the system it will soon find its way to property stocks and the housing market will continue to see a robust recovery,' Mr Lam said.

The residential property market has been showing tentative signs of recovery, boosting  leading property counters by as much as 70 per cent over the past six months.

However, profit taking in the developers was offset by renewed interest in mainland stocks as H shares jumped 1.44 per cent while red chips gained 1.29 per cent. Analysts said some investors had chosen to switch out of blue chips and into red-chip laggards.

'China stocks look rejuvenated and oil plays have come back to life,' Celestial Asia Securities research head Herbert Lau Chung-kwan said.

The mainland's dominant offshore oil producer CNOOC jumped 3.27 per cent to $14.20 while piped-gas supplier Xinao Gas climbed 6.87 per cent to $4.275.

Meanwhile, a new regulation passed by mainland authorities this week allowing non-financial institutions - such as carmakers - to provide vehicle financing  gave impetus to car manufacturers.

Denway Motors gained 4.52 per cent to $5.20.

Late buying interest in Hong Kong's two biggest stocks also supported the index.

Global banking giant HSBC gained 0.92 per cent to $109 while the  mobile-telephone carrier China Mobile moved up 1.18 per cent to $21.40.

Key Figures

Close: 11,723.92 (-10.56)

Turnover: $17.51 bln

Volume: 11.92 bln shares

Day's high: 11,737.03

Day's low: 11,624.37

Advanced: 367

Declined: 498

Unchanged: 423

October futures: 11,715 (-45)

November futures: 11,660 (-52)



Henderson placement weakens property plays