HK shares drag benchmark index to lowest in 3 months

By Hanny Wan  |   2008-6-27  |     NEWSPAPER EDITION

HONG Kong stocks fell, dragging the benchmark index to its lowest in three months, led by Foxconn International Holdings Ltd after Morgan Stanley cut its rating.

Financial shares retreated after Goldman Sachs Group Inc said Citigroup Inc may add to writedowns.

Foxconn, the world's biggest contract maker of mobile phones, closed at its lowest in more than two years. Industrial & Commercial Bank of China Ltd, the nation's biggest bank, slipped the most in a week after Goldman said Citigroup may write down US$8.9 billion in the second quarter.

"We don't think the problem is over in the credit market," Benjamin Pedley, managing director at LGT Investment Management Ltd in Hong Kong, told Bloomberg News. "There isn't a catalyst for a significant rebound." Pedley also said he was concerned about earnings at Asian companies.

The Hang Seng Index lost 179.49, or 0.8 percent, to 22,455.67, its lowest close since March 20. The measure climbed as much as 1.1 percent in the morning session.

The Hang Seng China Enterprises Index, which tracks so-called H shares of Chinese mainland companies, fell 0.8 percent to 12,095.98.

Foxconn fell 5.3 percent to HK$8.72, its lowest close since November 9, 2005. Morgan Stanley cut its rating on Foxconn to "equal-weight" from "overweight."

ICBC dropped 1.3 percent to HK$5.46, its largest decline since June 19. ICBC held US$1.22 billion of US subprime-related securities at the end of March. China Construction Bank Corp retreated 0.9 percent to HK$6.37.

Goldman lowered its rating on US brokerages to "neutral" from "attractive," saying the pace of deterioration in the industry "appears to be far worse than" it originally anticipated, according to a June 25 note. Thirty-three stocks on the 43-member Hang Seng Index declined while nine rose. June futures lost 1 percent to 22,426.

Aluminum Corp of China Ltd, the nation's largest producer of the metal, climbed 22 cents, or 2.5 percent, to HK$9.16, its first advance since June 16. The stock was the Hang Seng Index's biggest percentage gainer yesterday.

Its 14-day relative strength index, which shows how rapidly prices have advanced or retreated during a specified time period, fell to 21 yesterday.

A reading of 30 or lower signals to some analysts that shares are headed for a rebound.