Hong Kong shares close morning lower on profit-taking

Share prices closed the morning lower on profit-taking following yesterday's gains, with sentiment also weighed down by Standard & Poor's downgrade of Hong Kong's local currency ratings outlook and the ratings on HSBC's Hong Kong units, dealers said.

The Hang Seng Index closed the session down 85.69 points or 0.87% at 9,718.96, off a high of 9,803.30 and a low of 9,712.90, on trade of 2.956 billion hkd.

The Hang Seng October contract last traded at 9,725 points.

"Market players were reaping their profits from yesterday's (rise), while the S&P downgrade also (fuelled) further sell-offs, mainly in heavyweight HSBC," Fulbright Securities general manager Francis Lun said.

"However, selling pressure has not been excessive so far, with the index supported by futures-related buying ... ahead of the October contract expiry next week," Lun said.

Lun said the Hang Seng Index is likely to struggle at current levels in the afternoon session.

S&P said it has cut the outlook on its AA-rating for Hong Kong's long-term local currency rating to negative from stable, reflecting the territory's persistent fiscal pressures.

The rating agency has also revised the outlooks on its AA- local currency ratings for Hongkong and Shanghai Banking Corp Ltd and Hong Kong Mortgage Corp to negative from stable.

Lippo Securities associate director Kitty Chan said: "It's not surprising to hear of the downgrades."

"I guess most people here have been made aware of the current situation in Hong Kong," she said.

"We are anticipating a fiscal deficit of about 60-70 billion hkd per year, while our fiscal reserves stand at around 200 billion hkd. The situation is not optimistic. However, this is not new to us," Lippo's Chan said.

Financial Secretary Antony Leung said earlier this month the five months to August deficit has already hit 56 billion hkd, which has exceeded his former projection of a deficit of 45.2 billion hkd for the fiscal year ending March 2003.

The Hang Seng China Enterprises Index was down 20.18 points at 1,866.13, while the CAC Index fell 7.48 points to 1,084.63. The GEM board Index was down 1.52 points to 115.71 on trade of 76.122 million hkd.

HSBC was down 1.00 at 86.50, off a low of 86.25 following S&P's downgrade on its Hong Kong units, while Hang Seng Bank was off 1.25 at 84.75 and BOC Hong Kong was down 0.10 at 7.95.

Among telecom stocks, China Unicom gained 0.05 to 5.50, while China Mobile lost 0.15 to 20.95, PCCW dropped 0.01 to 1.18 and Hutchison Whampoa eased 0.40 to 48.80.

In the property sector, Sun Hung Kai Properties fell 0.40 to 49.50, Henderson Land eased 0.40 to 24.55, Cheung Kong lost 0.25 to 53.00 and New World Development dropped 0.075 to 4.45.