Profit-taking and weak overnight Wall Street trade reinforce downward trend Hong Kong stocks fell to a fresh two-week low yesterday as petroleum pushed higher and aggressive selling in the futures market put pressure on major index counters. The sell-off, which brokers said was partly prompted by profit-taking, was in line with the weak performance on Wall Street overnight, although the Hong Kong bourse had actually held up well in the morning on strength from CNOOC, Swire and Hutchison Whampoa. Li Ka-shing's flagship conglomerate was bought up on speculation that the company would sell its stake in Canadian oil firm Husky Energy to take advantage of record high oil prices. In a research note, Merrill Lynch analyst Cusson Leung argued that the chance of a Husky disposal had increased with this year's historic rise in oil prices. 'Although Hutchison may not necessarily need the extra cash flow, we expect that the valuation of Husky is looking more attractive to Hutchison now,' Mr Leung said. The stock gained as much as 1.2 per cent in early trading but fell back as the entire market took a dive to finish just 0.21 per cent higher at $70.25. Swire Pacific also saw early gains of 1.75 per cent fall to just 0.88 per cent by the end of the day, closing at $69.15. CNOOC also succumbed to profit-taking after closing at a record high the previous day, ending the session 0.51 per cent lower at $4.90. The Hang Seng Index fell 0.84 per cent, or 119.12 points, to 14,030.81 after bouncing off a session low of 14,006.75. Hang Seng Index futures dropped 193 points to 14,027, completely eliminating a 71-point premium to the underlying cash index from the previous session. A total of 36,607 front-month contracts changed hands, 78 per cent more than on Wednesday. The heavy selling weighed on HSBC and China Mobile, the two biggest index constituents. HSBC dropped 0.72 per cent to $123.50 and China Mobile lost 1.94 per cent to $27.85. 'China Mobile has been sold off for three days in a row now, and it seems it may be at the wrong end of an asset re-allocation for the third quarter,' one broker said, adding that South Korea seemed to be attracting capital from international funds as its currency weakens. Investors also chose to take profits on oil producers, despite another surge in the price of crude to just above US$62 per barrel, after the sector lost ground on Wall Street. CNOOC's slide was mirrored by PetroChina, which shed 0.82 per cent to $6.05. China Petroleum and Chemical Corp (Sinopec) lost 1.60 per cent to $3.075. The trend was bucked by China Oilfield Services which rallied 5.17 per cent to $3.05, the best performing H share. The H-share index fell 1.38 per cent, or 67.96 points, to 4,847.33, with airlines leading the descent. China Southern Airlines plunged 10.8 per cent to $2.075 after industry sources said its parent firm had lost more than one billion yuan in the collapse of a mainland securities firm last year. A source said the loss accrued solely to the parent firm and was not related to the Hong Kong-listed arm but investors nevertheless dumped the stock. Other airlines also suffered because of rising fuel costs, with Air China dropping 4.85 per cent to $2.45 and China Eastern Airlines sliding 4.62 per cent to $1.24. Kerry Properties fell 0.9 per cent to $17.30. The real-estate developer said it had scrapped plans to build a power plant in China's eastern province of Jiangxi after a study showed the project might cost more than expected.