Business

Thu Jun 12 00:45:02 PDT 2008

HONG KONG, June 12 (Reuters) – Hong Kong shares fell 2.2 percent on Thursday, sliding for the fourth straight day, led by Chinese stocks on fears of rising inflation and continued credit tightening on the mainland.

But shares in major power producers such as Huadian Power bucked the broad market trend after China’s Shandong province raised the peak power tariff for industrial users.

A 5.9 percent drop in Aluminum Corp of China (Chalco) weighed on the market amid worries of weaker earnings after analysts said production costs for alumina had surged 24 percent between January and April.

Investors also feared harsher-than-expected liquidity tightening steps by Beijing would hurt corporate profits, which helped send China’s main stock index to a 14-month low.

"Retail investors have lost confidence in the A-share market and some foolish ones are dumping shares now, even though it’s too late," said Peter Lai, director with DBS Vickers.

The Hang Seng Index finished the morning session down 517.67 points at 22,809.937, after dipping close to its March 31 low of 22,700.84 points earlier in the day.

Mainboard turnover increased to HK$40.87 billion ($5.24 billion) from HK$35.48 billion on Wednesday.

The index came off its lows helped by gains in Chinese telecom operators China Unicom <0762.HK> and China Netcom <0906.HK>. The smaller of he mainland’s four listed telecom companies rallied on talk that China is likely to grant 3G licences to China Unicom and China Netcom at the same time as China Mobile <0941.HK>.

It had been speculated that China Mobile would take the lead in rolling out 3G services nationwide with its homegrown TD-SCDMA technology and the others would follow later.

China Unicom rose 2.7 percent and China Netcom was up 2.6 percent. Index heavyweight China Mobile extended Wednesday’s 1.4 percent slide to drop 1.9 percent on Thursday. Its share price is now at its lowest since late March.

The China Enterprises Index <.HSCE> of Hong Kong-listed mainland shares slid 3.1 percent.

Power producers were the day’s bright spot, with Shandong’s largest power producer Huadian Power <1071.HK> jumping 6.3 percent on news of the power price hike. Huaneng Power <0902.HK> climbed 3.2 percent and Datang Power <0991.HK> rose 3.4 percent.

Asia’s largest refiner Sinopec corp <0386.HK> dropped 4.4 percent as record oil prices were expected to erode the company’s refining margins.

China Merchants Bank <0144.HK> fell 4.6 percent after the country’s sixth-largest bank said it was planning to raise 30 billion yuan ($4.34 billion ) by issuing subordinated bonds. The announcement follows CM Bank’s winning bid to buy a majority stake in Hong Kong’s Wing Lung Bank <0096.HK>.

New listing Little Sheep <0968.HK> was up 3.1 percent after opening sharply lower. The hot pot restaurant chain operator opened at HK$2.90, 8.8 percent lower than its issue price

(Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)

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