Hong Kong stocks slid yesterday amid worries that record oil prices could fan inflation risks, damping hopes for more deep interest rate cuts by the US Federal Reserve and depressing rate-sensitive property shares.

A report that KKR Financial Holdings, the listed affiliate of private equity group Kohlberg Kravis Robers & Co had delayed repayments on billions of dollars of debt stoked credit worries and sent the market to steeper losses in the afternoon.

Record oil above $100 a barrel and rallying copper and gold prices boosted some resource stocks, but high crude prices were an overall negative for the broad market.

"People are worried about inflation," said Tat Auyeung, fund manager at APEX Capital Management. "If oil prices continue zooming around these levels, it will be tough for the Fed to cut rates aggressively."

The benchmark Hang Seng Index finished down 2.2 percent, or 532.59 points, at 23590.58, near the day's low. The China Enterprises index of H-shares, or Hong Kong-listed shares in mainland companies, fell 3 percent, or 420.12 points, to 13552.82.

Mainboard turnover was HK$89.7 billion compared with Tuesday's HK$78.9 billion.

In the near term, Auyeung said the market will see more range-bound trade.

"After this big drop, it'll be quieter and range-bound, until there's more confirmation on oil and the Fed."

Oil producers, among the day's most heavily traded shares, were mixed. PetroChina Co Ltd surrendered earlier gains, ending down 2.2 percent to HK$11.70. CNOOC Ltd was the top blue chip gainer, up 0.8 percent to HK$12.78.

Metals stocks jumped, led by Lingbao Gold, up 3.6 percent to HK$4.67. Another gold miner, Zijin Mining, vaulted nearly 2 percent to HK$9.92 in heavy trade. Xinjiang Xinxin Mining Industry Co Ltd leapt 2.3 percent to HK$6.69.

Jiangxi Copper, China's largest copper smelter, gained almost 2 percent to HK$17.18 after the red metal hit four-month highs.

Among shares in Hong Kong property developers, Cheung Kong (Holdings) was off 2.7 percent to HK$116.90 and Sino Land tumbled 5 percent to HK$20.80. Hong Kong's rate cycle tends to track the US' since its currency is pegged to the US dollar.

Investors also cashed in on the recent rally in telecoms stocks. China Mobile dropped 2.7 percent to HK$116 and China Unicom slumped 4.1 percent to HK$18.38.

China Telecom slid 5.2 percent to HK$5.99.

Agencies

(China Daily 02/21/2008 page15)