Hong Kong shares close lower on reduced hopes of aggressive U.S. rate cut

HONG KONG (AFX-ASIA) - Share prices closed lower as stronger-than-expected April U.S. retail sales data reduced expectations of an aggressive interest rate cut at tomorrow's FOMC meeting, dealers said.

	    They said interest rate sensitive financials and properties were the worst performers, with HSBC under additional pressure amid speculation of a merger with Merrill Lynch.

	    The Hang Seng Index was down 377.44 points at 13,259.17, off a low of 13,239.15 and a high of 13,608.84, on turnover of 6.84 bln hkd.

	    The Hang Seng May contract last traded at 13,210 points.

	    The Hang Seng China Enterprises Index was down 4.84 points at 478.69, while the CAC Index was down 8.70 points at 1,210.04.

	    The Tracker Fund was down 0.35 at 13.30, and the GEM Index was up 0.63 points at 251.28 on turnover of 124.46 mln hkd.

	    Louis Wong, an analyst with Philip Securities, said investors were nervous due to the reduced possibility of an aggressive U.S. interest rate cut this week, as the economic data released on Friday were stronger-than-anticipated.

	    "The strong economic data may sway the Fed's decision to cut interest rate aggressively this week...the U.S. stock markets were lower last Friday," he said.

	    Wong said interest rate sensitive financials and properties led the initial decline. The financial sub-index lost 442.77 points to 20,466.88 and the property sub-index dropped 724.46 points to 17,179.26.

	    Cheung Kong fell 2.00 to 91.25 hkd, Sun Hung Kai Properties shed 4.0 to 74.75, Henderson Land lost 1.70 to 35.60 and New World Development shed 0.45 to 9.90.

	    Sino Land fell 0.225 to 3.525 and Amoy Properties lost 0.45 to 8.50. 

	    HSBC was down on speculation it will acquire Merrill Lynch at a high premium, with investors concerned about the fund-raising pressure this would create for HSBC, dealers said.

	    HSBC fell 2.25 to 96.75 and Hang Seng Bank shed 2.00 to 88.25.

	    Bank of East Asia lost 0.25 to 18.65, while Dao Heng Bank rose 0.75 to 58.75.

	    For telecom stocks, China Mobile fell 1.80 to 37.20 on concerns that the company will propose a share placement to fund the additional acquisition of mobile phone networks from its parent.

	    China Unicom lost 0.25 to 11.50, Hutchison Whampoa lost 1.25 to 85.75, while Pacific Century CyberWorks was unchanged at 2.70.

	    Johnson Electric fell 0.75 to 14.65 after the company announced higher  than expected estimates for the costs incurred from the closure of its Mississippi plant.

	    First Pacific added 0.04 hkd to 1.74 before it goes ex-dividend later this week.

	    Among China stocks, China Resources was unchanged at 11.95 and Shanghai Industrial shed 0.15 to 13.60.

	    Legend finished down 0.10 at 5.70.

	    Travelsky rose 0.30 to 5.75 and Beijing North Star ended down 0.01 at 1.47.

	    On the GEM board, Sunevision fell 0.04 to 1.81 after the release of its earnings results while tom.com rose 0.075 to 2.10.

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