HSI yields to profit-taking

Profit-takers dragged the Hong Kong stock market to a lower close yesterday, quashing even a short-lived rebound ahead of the Government's successful land auction.

The Hang Seng Index closed at 12,409.78, down 356.66 points or 2.79 per cent, with all but six of the blue chips ending lower.

Market stalwart HSBC fell 1.07 per cent to $277 after closing at a record high $280 on Monday.

The turnaround was not unexpected by market insiders after the index broke through the 12,000-point level on Friday only to attack the 13,000 mark the next day.

'The market has gone up so much and [yesterday] was long-overdue profit-taking,' Celestial Asia Securities' Eugene Law Ka-kin said. 'It's a classic situation . . . it was selling on confirmation of good news from the auctions.' Before the market's close, the Government reaped $1.49 billion from the sale of three residential sites, the first government land sale in a year.

Analysts said the three sites fetched better than expected prices but went to relatively small property companies - the private Nan Fung Development, K Wah International and second-liner blue chip Sino Land.

Shares in K Wah and Sino rose, in contrast to a 2.65 per cent drop in the Hang Seng property sub-index.

Sun Hung Kai Securities research head Gilbert Chu Kwok-tsu said of Sino's rise: 'Maybe some people see that because Sino has moved back into the property market it's a good sign for the market.

'About a year ago, there was some worry that Sino might go under and I think they did a good job of raising cash and now they're back.' Wharf, Hang Lung Development and Henderson Land saw steep falls.

Wharf, recently driven up by interest in Internet-related stocks on the back of talk the firm would introduce high-speed Internet services using its cable-television network, fell 14.13 per cent to $16.10.

Hang Lung dropped 9.54 per cent to $9.95 and Henderson Land shed 2.25 per cent to $43.30.

Brokers said good news from the sale had already been factored into the market before the auction.

Furthermore, there had been continued speculation that Wharf and Henderson would join Hutchison Whampoa and test the water with share placements while market sentiment was good.

The companies have denied such a move.

Mr Chu said: 'People are saying that Hutchison is doing a share placement, but they haven't done anything.' South China Brokerage vice-chairman Howard Gorges said it was a downturn waiting to happen and the sell-off late on Monday was a precursor to yesterday's market.

'It's not surprising, having had the run that it's had,' Mr Gorges said. '[On Monday,] we had a sell-off in the afternoon, so the writing was on the wall.' Leading blue chips floundered but second-tier companies and second-line blue chips did not.

Citic Pacific finished 0.74 per cent higher at $20.35 and City Telecom gained 11.65 per cent to $1.15. Hanny closed 7.5 per cent stronger at $2.15.

'There was quite a lot of activity in second-tier blue chips,' Mr Gorges said. 'The market has broadened and that also spread to second-liners. The second and third-liners will follow the first-liners and they were overdue to move up a bit.'