HONG KONG (XFN-ASIA) - Share prices closed sharply lower, with the index again falling below the 15,000 level, as financials and China Mobile came under heavy selling pressure on worries about their earnings growth.
China Mobile slumped over 5 pct ahead of its third-quarter results, while mainland banks were sold off after China Merchants Bank flagged slower earnings growth earlier this week.
Local banks were pressured after news that they will buy back mini-bonds offered by collapsed US investment bank Lehman Brothers from holders at market value.
Oil producers CNOOC and PetroChina both fell more than 6 pct after crude oil price fell below 70 usd a barrel overnight on expectations that slowing global growth will reduce demand for energy.
US stock futures pointing to a weak open on Wall Street tonight led to a spurt in selling in the final minutes of trade.
Investors were also cautious as China will release third-quarter economic data, including GDP numbers, on Monday.
The Hang Seng index closed down 676.31 points or 4.44 pct at the day's low of 14,554.21, after moving to a high of 15,300.07. For the week, the index is down 242.66 points or 1.6 pct.
Turnover was 59.35 bln hkd.
Castor Pang, strategist at Sun Hung Kai Financial group, said mainland financials and heavyweight China Mobile suffered big losses towards the close during the auction trading session.
'China banks widened losses on worries that their earnings growth may be hit by more non-performing loans as more companies may close down due to financial problems,' he said.
Pang noted talk that China may urge banks to ease loan requirements and lower lending rates to help companies struggling with liquidity problems.
'China would rather hurt banks... to avoid bigger social problems like high unemployment rate and more shutdown of companies,' Pang noted.
Toymaker Smart Union Group has lodged a petition with the Hong Kong high court for a winding-up of the company. The company has shut three factories in China in a sudden move, due to rising costs and falling export orders from the US. About 7,000 workers are reportedly losing their jobs.
Media reports have also said hundreds of other firms operated by Hong Kong businessmen in China are closing down or on the brink of bankruptcy amid a deteriorating operating environment.
Dennis Poon, research head, South China Securities, said sentiment remained bearish as global recession worries persist.
Investors will keep a close eye on China's economic data, given fears that its growth is slowing due to weakening exports
'The local bourse is expected to remain volatile in the near term, responding to daily news flow,' Poon said.
Among large-caps, HSBC was down 3.3 hkd or 3.04 pct at 105.2, Hong Kong Exchanges and Clearing was down 3.0 hkd or 3.53 pct at 82.0 and China Life lost 1.4 hkd or 5.85 pct at 22.55.
China Mobile was down 3.70 hkd or 5.3 pct at 66.1 ahead of its third-quarter results, due Monday. Credit Suisse expects the telecoms giant to report 34 pct rise in net profit for the three months to September to 29.395 bln yuan.
China Mobile's rival China Unicom was down 0.70 hkd or 6.67 pct at 9.8.
China banks were sharply lower, with ICBC losing 0.2 hkd or 5.25 pct at 3.61, Bank of Communications down 0.38 hkd or 6.67 pct at 5.32, China Construction Bank down 0.25 hkd or 6.67 pct at 3.50 and Bank of China tumbling 0.2 hkd or 7.75 pct to 2.38.
China Merchants Bank was down 1.08 hkd or 6.92 pct at 14.52, extending yesterday's 7.69 pct fall after it signaled a decline in its earnings growth.
China Merchants, the mainland's sixth-largest lender, said Wednesday that it expects its net profit for the nine months to September to be up more than 80 pct over the same period last year under Chinese accounting standards.
However, that is well below the first quarter growth pace of 140 pct and the first half pace of 116 pct.
PICC P&C lost 0.05 hkd or 1.99 pct at 2.46 despite news that it has taken 32.35 pct stake in China Credit Trust, making the insurer the mainland's second largest insurance group after China Life.
Ping An Insurance was down 2.80 hkd or 7.31 pct at 35.5 after JP Morgan cut the target price for the stock to 54.2 hkd from 61.9, reflecting large downward revisions of earnings forecasts.
The brokerage cut its 2008 and 2009 earnings per share forecasts for Ping An by 92 pct and 35 pct, respectively, to factor in impairment loss on its investment in Europe's Fortis.
Ping An said earlier that it would book an investment loss of 15.7 bln yuan on its 4.99 pct stake in Fortis in third quarter results .
Among local banks, BOC Hong Kong lost 0.70 hkd or 5.98 pct at 11.0 and Bank of East Asia was down 0.65 hkd or 3.13 pct at 20.1.
Hong Kong banks will buy back mini-bonds offered by Lehman Brothers from holders at market value, as proposed by the government, the Hong Kong Association of Banks said.
Hang Seng Bank, which was not involved in Lehman minibonds sale, was also down 2.50 hkd or 2.3 pct at 106.0.
Fubon Bank (Hong Kong) was up 0.06 hkd or 3.55 pct to 1.75 following news that it is raising fresh capital by issuing shares that will be subscribed by its Taiwanese parent.
The finance sector index lost 1,164.66 points or 4.6 pct at 24,144.59.
Property developers reversed early gains, with the sectoral index finishing down 775.4 points or 4.68 pct at 15,807.37.
Cheung Kong lost 3.5 hkd or 4.67 pct at 71.5, Henderson Land was down 1.1 hkd or 4.06 pct at 26.0 and Sun Hung Kai was down 4.80 hkd or 7.08 pct at 62.95.
Local power utility CLP Holdings was up 1.05 hkd or 2.0 pct at 53.65 as investors sought out safe havens amid earnings uncertainty in other sectors.
Oil producers were sharply lower after crude oil fell below 70 usd a barrel overnight.
CNOOC was down 0.38 hkd or 6.21 pct at 5.74 and PetroChina lost 0.38 hkd or 6.03 pct at 5.92.
Refiner China Petroleum and Chemical Corp (Sinopec) was down 0.02 hkd or 0.38 pct at 5.21 after posting strong gains in the morning.
Metals and resources stocks continued their slide as commodity prices continued to slide on fears of reduced demand amid a global recession.
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