Investors are set to put the Fed chief's speech under scrutiny for clues on credit cost outlook Hong Kong stocks yesterday gave up some of the gains accumulated in the past three sessions as Wall Street remained weak and oil prices continued to linger near record highs. A lack of fresh buying impetus and some caution before United States Federal Reserve chairman Alan Greenspan's semi-annual speech to the Senate scheduled for late yesterday also kept players sidelined. Little news is expected from the speech but investors will scrutinise it for further hints of how aggressively the Fed is likely to push up US interest rates in the coming months. Despite the setback, the market remains well supported on the downside, and market watchers said they did not expect key indices to suffer from any extended falls in the next few days, but rather to drift sideways in a narrow range. 'The Hang Seng Index is likely to trade around the 12,000 level with daily fluctuations depending on corporate results in the US,' Delta Asia Financial Group research head Conita Hung said, noting strong support at 11,800. The Hang Seng Index fell 43.32 points or 0.35 per cent to 12,123.63, after adding 1.96 per cent in the most recent run-up. The H-share index held up somewhat better as investors continued to scoop up oil and petrochemical stocks amid indications their upcoming interim results will be strong but still finished 7.34 points, or 0.16 per cent, lower at 4,393.66. Oriental Patron Securities equity research head Tim Hong said: 'People who have sold H shares previously because of macroeconomic tightening concerns are now trying to get back in as the government is indicating there will be no rate increases.' Both investors who earlier closed out positions and investors who went short on H shares were being seen returning, he noted. PetroChina edged up 1.29 per cent to $3.90 and contributed strongly to limiting losses in the sector by adding 11.1 points to the index. Sinopec rose 0.82 per cent to $3.075 while Aluminum Corp of China (Chalco) gained 1.18 per cent to $4.275. Meanwhile, mainland power producers were targets on the sell side on talk that higher fuel costs would dampen earnings. ABN Amro downgraded the China power sector to 'neutral' from 'overweight', citing this as one reason, along with the possibility of more capacity and concerns over power pooling in the longer run. The situation was the worst for Huaneng Power, China's largest independent power producer, and Huadian Power International because 'much of their original coal purchase contracts were not honoured by suppliers, who decided to take advantage of higher prices in the spot', ABN analyst Pierre Lau said in a research report. 'To obtain enough coal for power generation, they had to buy more coal from the spot market, where prices are up 20 to 25 per cent so far this year,' he said, suggesting investors may be better off buying China Resources Power or Datang International Power Generation because of their fast capacity growth from greenfield expansions and more limited unit fuel cost increases. Huaneng Power fell 0.78 per cent to $6.30 and Huadian Power dropped 1.96 per cent to $2.50. Datang International was also down 1.54 per cent at $6.40, while CR Power gained 0.59 per cent to $4.25. Yanzhou Coal, which has risen 12.8 per cent in the past four sessions, became the worst H-share performer in percentage terms by falling 3.11 per cent to close at $9.35. It is still well above the $8.30 at which it placed $1.69 billion worth of new shares two weeks ago. Among blue chips, utilities outperformed on a day when all but seven of the 33 constituents ended flat or lower. Hong Kong and China Gas was the top gainer, adding 1.93 per cent to $13.20 partly as a result of the management saying the firm would continue to repurchase its shares. Ms Hung said: 'This gives confidence for other investors to buy, but I still think it is trading at a very high valuation. Yesterday, the company also signed preliminary agreements with the Xian city government valued at 900 million yuan to invest in natural gas projects as it continues its expansion into the mainland. Hongkong Electric Holdings edged up 0.91 per cent to $33.30 and CLP Holdings rose 0.23 per cent to $43. Among other gainers were micro-motor maker Johnson Electric Holdings, which added 0.67 per cent to $7.50. China Unicom fell 0.85 per cent to $5.85 after posting weak subscriber numbers for the third month in a row for last month. China Mobile, whose subscriber additions for last month were also below the monthly average for the first half, finished unchanged at $22.55. Index giant HSBC dropped 0.86 per cent to $115.