Hong Kong shares close morning sharply lower after Wall Street falls

HONG KONG (AFX-ASIA) - Share prices closed the morning sharply lower across the board following heavy losses on Wall Street, with sentiment weakened by the continued profit warnings by technology companies, dealers said. They said investors were also concerned about whether the U.S. Federal Reserve will slow down on its interest rate reductions after the stronger-than-expected February employment data, with selling pressure focused on interest-rate sensitive property and bank stocks. In particular, HSBC came under selling pressure following its losses in London after Goldman Sachs downgraded its recommendation and cut its current year price target and earnings forecast for the bank. The Hang Seng index closed the morning down 392.96 points at 13,383.76, off an early low of 13,277.52 and an early high of 13,438.89, on turnover of 5.48 bln hkd. The Hang Seng March contract last traded at13,374 points. The Hang Seng China Enterprises index was down 8.88 points at 370.51, while the CAC index was down 30.34 points at 1,058.31. TraHK was down 0.35 at 13.55 hkd on volume of 15.12 mln units. The GEM index was down 5.87 points at 271.63 on turnover of 62.31 mln hkd. MTR Corp was down 0.60 at 12.95 hkd. Dealers said the Hang Seng Index is likely to test 13,000 points soon amid continued uncertainty over Wall Street trends. The market opened sharply lower as investors rushed to unload their holdings after seeing the overnight losses on Wall Street, which were triggered by a series of profit warnings from major high tech stocks such as Ericsson, Cisco, Intel and Yahoo!. Bruce Ruffy, head of sales with Dresdner Kleinwort Wasserstein Securities, said investors have been facing uncertainty over the U.S. markets outlook. "Technically, the Hong Kong market has been oversold. But the unpredictable U.S. markets havecomplicated the overall scenario," Ruffy said. However, OCBC Securities director Peter Lai said he views the sell-off as a good buying opportunity both in the U.S. and in Hong Kong. "... Heavy losses have prompted a charity fund, which I manage, to buy about 100,000 HSBC shares this morning. If the stock falls below 97 hkd, the fund will buy more," Lai said. HSBC was down 4.50 at 98.00 hkd on volume of8.76 mln shares. In a note, Goldman Sachs lowered its recommendation on HSBC to 'market perform' from 'market outperform', and cut its current year price target for the stock to 850 pence from the previous 1,150 pence. Hang Seng Bank fell 1.50 to 88.00 and Bank of East Asia lost 0.50 to 17.60. Dealers said said concerns about whether the Fed will slow down the pace of interest rate reductions after the February employment data also weigh down the market. Ruffy of Dresdner Kleinwort Wasserstein said he still expects the Fed will cut interest rates by 50 basis points at the March 20FOMC meeting. "I hope the rate cuts would lend some support to the market," Ruffy said. Dealers said property stocks were moving closer to their reasonable price levels after recent corrections, but the sector was still in no hurry to buy due to external market concerns. Cheung Kong fell 1.50 to 87.50, Sun Hung Kai Properties lost 5.00 to 74.25 Henderson Land dropped 2.50 to 41.50 and New World Development was down 0.90 at 11.70 Core Pacific Yamaichi International analyst Arthur Law said his house has been underweight in the telecom sector on NASDAQ volatility. China Mobile lost 0.30 to 36.70 and China Unicom fell 0.35 to 10.10. Hutchison Whampoa lost 2.00 to 84.25 and Pacific Century CyberWorks dropped 0.10 to 3.975. On the GEM board, tom.com fell 0.05 to 2.05 and Sunevision lost 0.125 to 2.375. First Pacific was down 0.125 at 2.05 after it sold its entire 19.6 pct stake in property consulting firm Savills PLC. In line with the broader market, China plays also encountered heavy selling pressure this morning, dealers said. Anhui Expressway eased 0.09 to 0.73 and Beijing North Star lost 0.10 to 1.04. China Resources dropped 0.15 to 11.00 and Shanghai Industrial fell 0.35 to 12.80. Shandong Xinhua Pharmaceutical rose 0.04 to 1.17 after the company announced it will buy back up to 10 pct of its 150 mln H-shares. Perceived as a safe haven, the utility sector moved higher against the declines on the overall market. CLP rose 0.70 to 39.90 and Hongkong Electric gained 0.30 to 28.55, while Hong Kong and China Gas fell 0.20 to 10.95.

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