Hong Kong stocks indicate biggest drop in six years

Hong Kong's benchmark stock index completed its biggest quarterly drop in more than six years on concern credit market losses will widen.

Photo: Hong Kong stocks indicate biggest drop in six years

Bank of Communications Co., part owned by HSBC Holdings Plc, dropped the most in two weeks, after the Sonntag newspaper said UBS AG will need more capital. China Construction Bank Corp., which held $1.06 billion of securities linked to U.S. subprime loans at the end of June, fell for the first time in five days.

Esprit Holdings Ltd., a Hong Kong-based global clothing retailer, declined the most in more than a week on concern global consumption will drop after J.C. Penney Co., the third-largest U.S. department store chain, cut its earnings forecast.

The Hang Seng Index lost 436.75, or 1.9 percent, to close at 22,849.20, extending its drop this quarter to 18 percent. That's the gauge's largest quarterly decline since the three months to September 2001.

The Hang Seng China Enterprises Index, a measure of so- called H shares of mainland Chinese companies, fell 2.8 percent to 12,083.30, its biggest loss since March 20.

Bank of Communications lost 29 cents, or 3.1 percent, to HK$9.09, its largest decline since March 17. China Construction Bank retreated 16 cents, or 2.7 percent, to HK$5.81, its steepest drop since March 20. Bank of East Asia Ltd., Hong Kong's third biggest by assets, fell HK$1.05, or 2.6 percent, to HK$38.95, its largest drop since March 17.

UBS, the European bank with the highest losses from the U.S. subprime crisis, may ask shareholders to approve a capital increase of as much as 16 billion Swiss francs ($16.1 billion), Sonntag said yesterday, citing people it didn't identify.

Esprit dropped HK$2.25, or 2.4 percent, to HK$93.40, its largest decline since March 18. Yue Yuen Industrial (Holdings) Ltd., the world's largest maker of sports shoes for brands such as Nike Inc., lost 55 cents, or 2.2 percent, to HK$24.40.

J.C. Penney said March 28 that first-quarter same-store sales will post a "high single-digit" decline on a percentage basis. Profit will be about 50 cents a share, less than the 75 cents to 80 cents J.C. Penney previously predicted.

All but seven stocks on the 43-member Hang Seng Index declined. April futures dropped 2.8 percent to 22,630.

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

Developers: Cheung Kong (Holdings) Ltd. (1 HK), Hong Kong's second-biggest developer by market value, lost HK$1.40, or 1.3 percent, to HK$110.50. Henderson Land Development Co. (12 HK), the third largest, fell HK$1.95, or 3.4 percent, to HK$55.30. Both stocks dropped the most since March 20.

Goldman, Sachs & Co. cut its price estimate for Cheung Kong by 5 percent to HK$133, according to the brokerage's research note.

China Communications Services Corp. (552 HK), the nation's biggest builder of phone networks, fell 34 cents, or 6 percent, to HK$5.29, its biggest drop since March 17. The company plans to raise HK$1.89 billion ($243 million) to help fund acquisitions. China Communications Services said it will offer 326.7 million new shares and 32.7 million held by China's National Council for the Social Security Fund at HK$5.25 each.

China Oilfield Services Ltd. (2883 HK), a unit of the nation's third-largest oil producer, retreated 54 cents, or 4.1 percent, to HK$12.76, its biggest drop since March 20. The company said it plans to spend 5 billion yuan ($713 million) to build and buy vessels and drilling rigs this year.

China Telecom Corp. (728 HK) retreated 24 cents, or 4.7 percent, to HK$4.88, its biggest decline since March 20. The nation's biggest fixed-line phone company posted a 1.7 percent decline in fourth-quarter profit after losing subscribers. Net income dropped to 5.26 billion yuan, the company said.

Dongfang Electric Corp. (1072 HK), China's third-biggest maker of power-generation equipment, declined HK$2.30, or 6.8 percent, to HK$31.50, its biggest drop since March 18. Net income fell 1.9 percent to 2.41 billion yuan in 2007 as it invested in overseas markets, according to a statement to the Hong Kong stock exchange yesterday.

Dongfang Electric also said yesterday it proposed to sell up to 65 million new shares in China to raise funds to invest in energy-related infrastructure projects.

Wing Lung Bank Ltd (96 HK), controlled by the family of Chairman Michael Wu, surged HK$17.50, or 15 percent, to HK$135.70, its highest close on record. The bank announced March 20 Wu and his family may sell their combined 53 percent holding. Potential buyers, including China Merchants Bank Co. (3968 HK) and Australia and New Zealand Banking Group Ltd., have entered a second round of bidding, Hong Kong's Apple Daily newspaper reported on March 29, without citing anyone.

Xingfa Aluminium Holdings Ltd. (98 HK) retreated 17 cents, or 7.5 percent, to HK$2.11 on its debut. The producer of architectural and industrial aluminum profiles said it raised net proceeds of HK$207 million by selling 125.4 million shares at HK$2.28 each.