Hong Kong shares sag

Hong Kong blue chips fell 0.3 percent on Wednesday, with trade stuck in a tight range amid interest rate worries, but stocks scaled back early losses thanks to strong gains in the mainland share market. Aluminium Corp of China Ltd supported Hong Kong listed-China plays after leaping on speculation that its parent may transfer aluminium assets to the company.
The benchmark Hang Seng Index fell as much as 0.6 percent in morning trade after Wall Street slid on surging US bond yields amid fears that strong global demand would force central banks to raise interest rates.
But the more than 2 percent gain in the benchmark CSI 300 index of yuan-denominated, mainland-listed shares lent a foothold to the market. "It's a happy day for Hong Kong, especially when you look at other markets like the US," said Steve Cheng, associate director at Shenyin Wanguo.
"This should make the bulls feel better." But others said bulls needed to wait for further indications in the week when the US reports its inflation data for May. "On the one hand we have negative influence from the US, but on the other hand, the mainland stocks performed well," said Louis Wong, research director at Phillip Securities.
"Which party will gain the upper hand will depend on the CPI and PPI data." In the meantime, Wong said the market should be range-bound between 20,430 and 20,650 points. The Hang Seng Index traded in a 100-point range before closing down 57.64 points at 20,578.75. The China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies, fell 0.2 percent to 10,899.23. Mainboard turnover was HK$55.2 billion (US $7.1 billion), its lowest in more than two weeks.
Aluminium Corp of China, also called Chalco, raced up 4.8 percent to HK$11 in resumed trade amid hopes of an asset transfer by its parent, Chinalco. This comes after Chalco said it was planning to hold talks with Baotou Aluminium, which is majority-owned by Chinalco, about the restructuring of its aluminium business.
Mobile handset maker Foxconn International Holdings halted its eight-day declining streak to jump 1.7 percent to HK$21.30 in heavy trade, a day after saying it would spend $1 billion to at least double capacity by 2008.
Dips in crude prices prompted investors to book profits in oil stocks like CNOOC Ltd which has gained more than 10 percent since several brokers upgraded the stock on higher crude prices about two weeks ago.
Oil refiner Sinopec Corp fell 1.2 percent to HK$8.37. Rate-sensitive Hong Kong lenders were soft, with Bank of East Asia declining 1.5 percent to HK$44.30 and Hang Seng Bank falling 0.8 percent to HK$104.90. Hong Kong is sensitive to US interest rates because its currency is pegged to the US dollar.