Hong Kong Stocks Drop Most Since 9/11: World's Biggest MoverBy...

Hong Kong Stocks Drop Most Since 9/11: World's Biggest Mover

By Hanny Wan and Alexander Ragir
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Nov. 5 (Bloomberg) -- Hong Kong's Hang Seng Index tumbled the most since the Sept. 11, 2001, terrorist attacks after Chinese Premier Wen Jiabao said his government may delay allowing mainland investors to buy Hong Kong stocks.

China Mobile Ltd. had the biggest decline in five years, while China Unicom Ltd. plunged 8.3 percent. PetroChina Co., China's largest oil explorer, dropped the most in almost seven years even as its shares rallied in their first day of trading in Shanghai.

The second straight day of declines halted a 49 percent rally in the Hang Seng that began Aug. 20 when China's currency regulator said mainland investors would be allowed to invest in Hong Kong. Premier Jiabao said on Nov. 3 that the government needed more time to assess the risks to the stability of the city's financial system.

``I expect a significant correction in the Hong Kong market over the next few weeks,'' said Aaron Boesky, who manages $200 million as chief executive officer at Marco Polo Investments Ltd. in Hong Kong.

The Hang Seng Index plunged 1,526.02, or 5 percent, to close at 28,942.32, its steepest decline since September 2001 and the largest fluctuation among markets included in global benchmarks. The Hang Seng China Enterprises Index, which tracks 43 so-called H shares of Chinese companies listed in Hong Kong, lost 6.4 percent to 18,291.20, the biggest decline since May 2004.

Chinese investors may invest $60 billion of the country's $2.3 trillion of household savings in Hong Kong shares next year, according to JPMorgan Chase & Co. estimates. Chinese companies listed in Hong Kong already attract international investors prohibited from buying shares on mainland exchanges.

Red Chips

The value of Chinese shares listed in Hong Kong, called H shares and red chips, accounted for 53 percent of the Hong Kong stock exchange's main board at the end of September, up from 26 percent at the end of 2002, according to the bourse's Web site. In 1997, when the U.K. handed Hong Kong back to China, they accounted for 16 percent.

China Mobile, the world's largest mobile-phone operator by users, dropped HK$10.60, or 7 percent, to HK$141.60, its biggest decline since January 2002. China Petroleum & Chemical Corp., the nation's biggest oil refiner, plunged HK$1.26, or 10 percent, to HK$11.04, the biggest drop since its debut in October 2000.

China Unicom, the smaller of the nation's two mobile-phone companies, slipped HK$1.46, or 8.3 percent, to HK$16.12. Cosco Pacific Ltd., Asia's third-largest container-terminal operator, fell HK$1.85, or 8 percent, to HK$21.15.

On Hold

China's currency regulator on Aug. 20 gave no timing of the plan to allow individuals holding accounts in Tianjin city's Binhai economic zone to invest in Hong Kong stocks for the first time.

The H-share index surged 66 percent and the Hang Seng Index soared 42 percent since the start of trading on Aug. 20. The measures are the best performers in that time among 90 global benchmarks tracked by Bloomberg.

``Sentiment-wise, the market does react to Wen's comments,'' said Samantha Ho, a Hong Kong-based fund manager who oversees about $5 billion of Hong Kong and China equities at Invesco Asia Ltd., adding that investors had expected some delay in the program. ``In the short term there probably won't be much good news. A correction after the recent rally wouldn't be a bad thing.''

PetroChina, which passed Exxon Mobil Corp. as the world's largest company by market value, dropped HK$1.60, or 8.2 percent, to HK$18, its biggest decline since November 2000. The stock is still up 23 percent from a month ago and its 14-day relative strength index, a moving average based on whether the shares rose or fell, ended Nov. 2 at 71. A reading of 70 or higher signals to some analysts that shares are headed for a fall.

Shanghai Trading

PetroChina soared 163 percent to 43.96 yuan on its Shanghai debut after raising 66.8 billion yuan ($9 billion) in the biggest share sale this year to expand refining capacity by more than half and raise oil production. Investors applied for almost 50 times the amount of stock offered by the company.

All but two stocks on the 40-member Hang Seng Index declined. November futures lost 5.5 percent to 28,776.

The following stocks rose, fell or were suspended. Stock symbols are in brackets after company names.

China Eastern Airlines Corp. (670 HK), the country's third- largest carrier, halted trading in its shares pending the completion of Singapore Airlines Ltd. and Temasek Holdings Pte.'s purchase of a stake in the carrier. The airline didn't say how long the suspension was likely to last.

China Shenhua Energy Co. (1088 HK), China's largest coal producer, fell HK$2.35, or 4.9 percent, to HK$45.75. Mitsubishi Corp. acquired 0.2 percent of the Chinese energy company to expand in the commodities business in China, Japan's Nikkei newspaper reported, without saying where it got the information.

Hutchison Telecommunications International Ltd. (2332 HK) rose 12 cents, or 1.1 percent, to HK$11.48. Hutchison Whampoa Ltd. (13 HK), billionaire Li Ka-shing's largest company, said it has no plans to buy out minority shareholders in unit Hutchison Telecom. Hutchison Whampoa fell HK$3.60, or 4 percent, to HK$86.95.

Shougang Concord International Enterprises Co. (697 HK) fell 22 cents, or 5.2 percent, to HK$4.04. The Chinese steelmaker and real-estate developer may buy a stake in Australasian Resources Ltd.'s $2.1 billion iron ore project, the South China Morning Post reported, citing the company's Deputy Managing Director Chen Zhouping.

To contact the reporter on this story: Hanny Wan in Hong Kong at [email protected] ; Alexander Ragir in New York at [email protected]
Last Updated: November 5, 2007 10:33 EST