HK index posts worst drop in more than a week

By Hanny Wan  |   2008-6-20  |     NEWSPAPER EDITION

HONG Kong stocks fell yesterday, dragging the benchmark index to its biggest drop in more than a week, on speculation that credit-related losses will erode earnings and that the Chinese mainland will intensify its battle with inflation.

Bank of China Ltd, which reported US$203 million in first-quarter losses from subprime-mortgage-backed securities, declined the most in five months.

In the United States, Fifth Third Bancorp plunged after saying most of its second-quarter profit will evaporate, sending the S&P 500 Regional Banks Index to its biggest drop ever.

"As long as company earnings in the US aren't picking up, that'll continue to have a negative impact on Asian markets," said Mona Chung, a Hong Kong-based fund manager at Daiwa Asset Management Ltd, which oversees more than US$2 billion.

The Hang Seng Index lost 528.19, or 2.3 percent, to close at 22,797.61, its worst decline since June 10. June futures retreated 1.5 percent to 22,812. Financial stocks accounted for 39 percent of the drop. The gauge had gained 3.3 percent in the previous three days, Bloomberg News said.

Bank of China, the nation's third-biggest bank, lost 5 percent to HK$3.65 (US$0.47 ), its largest drop since January 22. Ping An Insurance (Group) Co, China's second-largest insurer, fell 3.4 percent to HK$59.20.

Aluminum Corp of China Ltd, the nation's largest producer of the metal, retreated 5.9 percent to HK$10.60, making it the No. 2 percentage loser on the Hang Seng Index. Macquarie Group Ltd cut the company's 2008 earnings per share estimate by 13 percent on higher production costs and lower prices.

The Hang Seng China Enterprises Index, which tracks so-called H shares of Chinese mainland companies, fell 3.1 percent to 12,431.44, its largest drop since June 10.

China Overseas Land & Investment Ltd, a builder controlled by the country's construction ministry, lost 4.9 percent to HK$13.46, its worst drop since June 10. Hang Lung Properties Ltd, a Hong Kong-based developer which also invests in the Chinese mainland, lost 3.5 percent to HK$26.05, its biggest slump since June 10.

The Hang Seng Property Index's 2.5 percent drop made it the biggest percentage group loser on the broader Hang Seng Index.