FBS; Hong Kong shares dive 4.5 pct as financials slide
By Parvathy Ullatil
HONG KONG, Nov 18 (Reuters) - Hong Kong shares shed 4.5 percent on Tuesday, unsettled by worries over a protracted global recession, and China Construction Bank slid after Bank of America said it was increasing its stake in the Chinese lender at a discount to its current trading price.
Other financial counters, including global lender HSBC Holdings, were also pressured after Citigroup's plan to cut 52,000 jobs was seen auguring more trouble for the sector in 2009.
'The news itself was not a big surprise to the market but it makes it clear that the turmoil in the financial sector is likely to continue at least into the first half of 2009,' said Peter Pak, vice president at BOCI Research.
Chinese auto makers dodged the downdraft in the broad market to notch up strong gains on talk that they would be likely beneficiaries of state aid as they cope with falling sales volumes in the face of a global recession.
Shares in Brilliance China Automotive rallied 9.8 percent while Geely Automobile Holdings rose 4.7 percent. Car sales fell for the second month in a row in September as a slowing economy slammed demand in the world's second largest vehicle market.
The benchmark Hang Seng Index finished down 613.64 points at 12,915.89.
'The weak volumes suggest that there is no crazy dumping or panic selling here, which means the index is unlikely to test its previous low in the near term,' said Castor Pang, strategist with Sun Hung Kai Financial.
Mainboard turnover rose to HK$44.8 billion ($5.7 billion) from Monday's dismal HK$39.8 billion.
TARGET PRICE SLASHED
Shares in Hong Kong Exchanges & Clearing, Asia's largest listed bourse operator, fell 7.5 percent to HK$56, taking its two-day decline to 14.5 percent after Morgan Stanley slashed its target price on the stock.
The U.S. investment bank cut its target price on HKEx to HK$38 from HK$75 on slowing market activity amid mounting worries over a global economic recession. Turnover on the bourse had fallen to a five-month low of HK$39.8 billion on Monday.
Shares in HSBC Holdings slid 3.6 percent to HK$79 after Goldman Sachs slashed its target price on the stock to HK$77 from HK$102. Goldman said it expected another year of weak earnings for the bank's consumer loan and credit card arm, Household International, amid disappointing economic data from the United States.
HSBC announced on Tuesday its was cutting 500 jobs in Asia as it grapples with global economic uncertainties.
The China Enterprises Index of top locally listed mainland Chinese firms fell 5.3 percent to 6,598.35, led by a 6.8 percent slide in top insurer China Life, tracking a 6.3 percent slump on the Shanghai Composite Index
Shares in China Construction Bank (CCB) ended down 5.6 percent, as Bank of America's purchase price for the additional stake in the Chinese lender was estimated at HK$2.8, a 32 percent discount to Monday's closing price of HK$4.11. The stock fell more than 10 percent to HK$3.68 earlier Tuesday.
Analysts also cited concern that the U.S. lender may dispose of some of its existing holdings, which were released from a three-year lock-up period in October, in the coming quarters to bolster its own capital.
'People interpret it as BoA positioning to cash out of its original stake. Rather than as a stimulus to buy, it has become an opportunity to sell to some investors,' said Paul Lee, analyst at Tai Fook Securities.
Commodity-linked stocks were battered as crude oil price stayed weak on Tuesday after recession worries pushed prices down to a near 22-month low on Monday and concern over falling demand kept a lid on gains.
Asia's largest oil and gas producer, PetroChina, shed 3.6 percent, while the world's most valuable coal producer, China Shenhua, slid 6.9 percent.
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