Index gives up some of its gains after a dip on Wall Street but blue chips continue to draw support Hong Kong stocks fell back on profit taking after Wall Street suffered a big sell-off overnight as concerns about declining profit growth reemerged. Selling pressure in the local market was not very heavy, however, and analysts said expectations of strong interim earnings and a favourable interest rate outlook continued to support blue chips. Property remained the favoured sector with Wharf Holdings and Wheelock & Co both ending higher, while developer heavyweights Sun Hung Kai Properties and Cheung Kong Holdings both closed unchanged. The Hang Seng Index shed 0.6 per cent, or 74.9 points, to finish at 12,320.21 after recovering about half of the 149-point intraday loss in significantly lower turnover than the previous day. The index was the top performer in the region with a 2.24 per cent gain on Wednesday when most major markets advanced on optimism about strengthening US demand and suggestions that US inflation remained under control. By comparison, the Dow Jones Industrial Average shed 1.01 per cent in New York on Wednesday. The Nasdaq Composite index tumbled 2.23 per cent to a new 2004 low, dragging down the technology-heavy markets in Japan and Korea by 1.3 and 1.42 per cent, respectively. 'The (Hong Kong) market lost only about a quarter of [Wednesday's] gains, which is a minor pull-back,' Tai Fook Securities sales director Andrew To said. He noted that so far this month, Hong Kong has outperformed most other major markets due to speculation and in some cases actual guidance about strong corporate profits, and if the numbers deliver then there could be more inflow of funds. Hang Seng Index July futures fell 93 points to 12,352 yesterday but remained at a 32-point premium to the underlying index, indicating traders were expecting more upside. However, there is still uncertainty surrounding the outlook for the US and Chinese economies, and Hong Kong is also very much led by what is happening in US markets, which are currently looking bad from a technical point of view. This could limit the performance of the local market in the short term, ABN Amro head of sales Daniel Poon said. The selling of H shares was slightly more aggressive and erased all of the previous session's gains, which admittedly were a lot smaller than those in the blue-chip sector. The index fell 1.28 per cent, or 56.88 points, to 4,379.1 after running into strong resistance around the 4,400-point level for the second day in a row. Power producers continued to fall amid earnings forecast downgrades by banks and brokerages, which were concerned about a squeeze in margins due to sharply higher coal prices. Huadian Power International dropped 4.04 per cent to $2.375, Datang International Power Generation fell 3.01 per cent to $6.45 and Huaneng Power gave up 2.36 per cent to $6.20. Yanzhou Coal rose 2.7 per cent to finish at $9.50. China Petroleum & Chemical Corp (Sinopec) fell 2.38 per cent to $3.075 after racking up 11.5 per cent gains in the past five sessions. PetroChina held up better and lost only 0.64 per cent to $3.90 as crude oil prices above US$40 per barrel continued to support the stock. Chinese telecoms stocks also remained under pressure amid disappointment over weak subscriber growth. According to one trader, China Unicom also saw some selling on news that a rights issue offered by its mainland-listed sister company, China United Telecommunications, was 10 per cent undersubscribed. China Unicom closed down 1.65 per cent at $5.95, while China Mobile gave up 0.65 per cent to finish at $23.10. Index heavyweight HSBC Holdings fell 0.43 per cent to $116. Wharf, which is seen benefiting from the continuing influx of mainland tourists hitting the shops, was the top performing blue chip with a 0.62 per cent gain to $24.45. Its parent company Wheelock rose 0.5 per cent to $10.15. Bulk carrier Jinhui Holdings dropped another 10.59 per cent to $7.60. The company plunged 24.44 per cent on Wednesday after warning it will report a substantial loss for the first half.