Hong Kong shares end down, China plays see sharp falls

Hong Kong stocks ended lower on Thursday with China plays falling for the fourth straight day on persistent fears that the central government might take further steps to cool the economy.
The blue chip Hang Seng Index closed 0.65 percent lower, or 78.92 points, at 12,082.86. The H-share index, which groups China stocks listed in Hong Kong, tumbled 3.08 percent, or 128.33 points, to 4,034.89.
Market watchers said Hong Kong's leading share index could fall to levels near 11,700 if investors keep trashing China shares next week.
"The Hang Seng is down because of a strong sell-off on China shares. If those pressures continue, the Hang Seng may test lower levels at between 11,700 and 11,800 within three trading days," said Alfred Chan, chief dealer of Cheer Pearl Investment Ltd.
Chinese auto stocks extended losses after Volkswagen AG, which dominates China's sedan market, cut prices in the country by up to 11.7 percent to match rival General Motors in a decelerating market.
Core Pacific-Yamaichi said it believes a price war is brewing and that other large sedan makers would follow suit.
Geely Auto, a maker of low-priced cars, dived 11.43 percent to HK $0.62. Denway Motors and Great Wall Auto also skidded by 5.26 percent and 5.66 percent respectively. Volkwagen's price cuts are taking on new significance as Beijing applies the brakes to the fast-growing industry by restricting auto loans and after overall car sales in May slumped nearly 20 percent from April.
Dealers said investors continued to fret about a possible interest rate hike by Beijing or other policy tightening measures, which would dent corporate profits or limit their ability to raise fresh capital to expand.
A key central bank monetary policy committee member was quoted by state media as saying that it was not the right time to raise China's interest rates but that it may become necessary if prices keep rising.
Many economists say a rate hike is inevitable.
Beijing has so far tried to slow the economy by forcing banks to keep more money in reserve and by issuing edicts banning new investments in industries like steel, aluminium, and cement.
China Mobile (HK) Ltd, the world's largest cellular firm by user, slid 0.44 percent to HK $22.75 after the firm said it may boost capital expenditure to improve network quality.