Hong Kong shares ended 2.3 percent lower on Tuesday after heavyweight HSBC shed nearly a fifth of its value, losing around $17 billion in market capitalisation, after the bank announced a rights issue at a deep discount and slashed its dividend.
But losses on the main index were tempered by gains in Chinese counters, including property and metals, as China's parliament is set to meet later this week amid expectations Beijing will expand its 4 trillion yuan, two-year economic stimulus package.
"There have been reports that China may increase its stimulus spending to between 6 trillion to 8 trillion yuan," said Steven Leung, sales director with UOB Kay Hian. "But almost everybody believes the package will be expanded to include other sectors and industries," he said.
Shares in China Overseas Land shot up 5.2 percent to HK$10.36, on expectations of further rescue measures for China's ailing property market after the sector did not feature in Beijing's list of top 10 priority industries. The benchmark Hang Seng Index ended 283.58 points lower, with HSBC alone accounting for a 258 point drop, at 12,033.88, its lowest level since November 2008.
HSBC ended down 18.8 percent at HK$46.25 after opening at its lowest level since the 1998 Asian financial crisis, matching a similar sell-down in the bank's London-listed shares. The UK-lender announced a $17.7 billion rights issue at a deep discount on Monday and slashed its annual dividend. HSBC's local unit, Hang Seng Bank fell 3.5 percent to HK$81.30 following a disappointing 46 percent drop in second half earnings.
Another local lender BOC Hong Kong fell 5.7 percent to HK$7.17. Mainboard turnover rose to HK$43 billion compared with Monday's HK$36.4 billion, mainly driven by the sell-off in HSBC shares. Shares in Hong Kong Exchanges & Clearing fell 2.8 percent to HK$55.90 ahead of its 2008 earnings announcement on Wednesday. Morgan Stanley slashed its target price on the stock to HK$33 on Monday, warning of continued weakness in turnover on the exchange in 2009.
China Mobile, the top weighted stock on the main index, rose 0.4 percent while China Life gained 1.5 percent. The China Enterprises Index of top mainland firms outperformed the main index and defied losses on the Shanghai bourse with a 0.5 percent jump to 6,617.57.
Shares in industries that stand to benefit from the first round of stimulus spending rose sharply on Monday with Angang Steel adding 7.8 percent and cement maker Anhui Conch piling on 7.5 percent. An overnight uptick on the global freight index drove up shares in Chinese dry bulk carriers.
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