Hong Kong shares close lower on profit taking; smaller banks in focus

HONG KONG (AFX-ASIA) - Share prices closed lower on profit taking after yesterday's strong gains, amid caution ahead of an announcement tomorrow on the re-weighting of Morgan Stanley Capital International indices, dealers said.

	    They said several second-line banks were higher following a report that China Resources has asked Credit Lyonnais to find a buyer for its 34 pct stake in HKCB Bank Holdings.

	    The Hang Seng Index closed down 178.69 points at 13,459.18, off an early low of 13,449.04 and a high of 13,631.40, on turnover of 8.27 bln hkd.

	    The Hang Seng May contract last traded at 13,469 points.

	    The Hang Seng China Enterprises Index was up 5.83 points at 506.64, while the CAC Index was down 3.99 points at 1,241.31.

	    The Tracker Fund was down 0.10 hkd at 13.60 and the GEM Index was down 0.76 point at 261.10 on turnover of 279.19 mln hkd.

	    Marty Chan, an analyst with Polaris Securities, said today's fall was largely a technical correction after the rise in the Hang Seng Index yesterday.

	    "Some investors were cautious ahead of the release of the MSCI's re-weighting in the indices tomorrow," he said.

	    Analysts said the weighting of the Hong Kong market in the MSCI indices will possibly be reduced as many local stocks have a relatively low free float.

	    "In some ways, investors were too cautious. The impact on Hong Kong shares will be neutral, even if the weighting for the Hong Kong market is reduced," Chan said.

	    Profit taking was most notable in interest rate sensitive financials and properties after their strong gains this week, he said.    

	    The financial sub-index was down 333.98 points at 20,591.22 and the property sub-index shed 72.78 points to 17,632.94.

	    HSBC fell 1.75 to 97.50 hkd, Hang Seng Bank shed 1.00 to 88.50, and Bank of East Asia lost 0.25 to 18.15.

	    Sun Hung Kai Properties closed down 0.25 to 76.00, Henderson Land shed 0.30 to 36.60 and New World Development fell 0.05 to 10.10.

	    Cheung Kong, which is expected to be re-instated in the MSCI indices, was steady at 92.50. 

	    Hutchison finished down 2.0 at 85.25, China Mobile dropped 0.60 to 38.40, China Unicom fell 0.05 to 12.00 and Pacific Century CyberWorks was up 0.025 at 2.75.

	    Red-chips and H-shares were mixed with upside limited by profit taking after recent gains, dealers said.    

	    Beijing North Star was up 0.11 at 1.76, Beijing Datang grew 0.15 to 2.975, but Beijing Airport was down 0.05 at 2.05, and Beida Jade Bird shed 0.025 to 2.125.

	    CASIL Telecom rose 0.04 to 0.55, Shenyin Wanguo was 0.07 higher at 1.10, but Legend was down 0.10 at 5.40, and Stone Electronic fell 0.03 to 1.08.

	    CNOOC lost 0.25 to 8.00, Sinopec was up 0.03 at 1.50 and PetroChina was unchanged at 1.75.

	    On the GEM board, tom.com fell 0.025 to 2.175, hongkong.com dropped 0.015 at 0.365 and Sunevision shed 0.06 to 1.76.

	    Polaris' Chan said several second line banks were higher on the back of gains in HKCB Bank, following a report that China Resources has appointed Credit Lyonnais to find a buyer for its 34 pct stake in HKCB Bank.

	    HKCB Bank rose 0.275 at 3.725 on renewed speculation that it will receive a  takeover proposal from a third party.

	    CITIC Ka Wah Bank, which was tipped to be a possible buyer for HKCB Bank, gained 0.10 to 2.375. International Bank of Asia was up 0.05 at 2.225 and Wing Hang Bank was up 0.40 at 31.40.

	    Johnson Electric shed 0.60 to 14.35 on concerns over the U.S. economy.

	    First Pacific was down 0.06 at 1.68 on institutional selling.

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