Hong Kong Stocks Fall on Profit Concern; Cathay, Dah Sing Slump

By Hanny Wan

Nov. 6 (Bloomberg) -- Hong Kong's benchmark index fell, erasing three days of gains, after earnings forecasts by Cathay Pacific Airways Ltd. and Dah Sing Banking Group Ltd. reignited concern the global economy will worsen.

Cathay Pacific, the city's largest carrier, retreated 15 percent after predicting ``disappointing'' results. Dah Sing Bank slipped 8.8 percent after saying full-year profit will fall ``substantially'' below the year-earlier level. Country Garden Holdings Co. dropped 12 percent after RTHK reported that the developer won't meet its full-year sales target.

``Everyone expects 2009 earnings are definitely going to be disappointing,'' said Kenny Tang, executive director at Redford Asset Management in Hong Kong. ``Investors shouldn't put money in shares that are sensitive to economic cycles, such as property and local banks.''

The Hang Seng Index lost 1,108.80, or 7.5 percent, to 13,731.36 as of 2:57 p.m. local time, erasing a three-day, 6.2 percent jump. The Hang Seng China Enterprises Index, which tracks so-called H shares of Chinese companies, declined 8.6 percent to 6,607.11.

The retreat pares the Hang Seng Index's advance since reaching a four-year low on Oct. 27 to 25 percent. Shares rallied amid global efforts to ease the fallout from the credit turmoil. The U.S., Australia, China and India cut interest rates while South Korea pledged to pump $10.8 billion into its economy. The gauge is still down 51 percent this year.

Cathay Pacific plunged 15 percent to HK$8.03, the sharpest drop on the Hang Seng Index. The company warned financial results this year will be ``disappointing,'' hurt by softening revenue and losses on fuel hedging contracts, estimated to be HK$2.8 billion ($361 million).

Dah Sing

Dah Sing Bank, the Hong Kong-based bank with potential losses tied to the collapse of Washington Mutual Inc., lost 8.8 percent to HK$4.56. The company warned the global financial crisis and economic slowdown would damp second-half results. Its parent Dah Sing Financial Holdings Ltd. tumbled 18 percent to HK$18.

Country Garden retreated 12 percent to HK$1.27. China's second-largest real estate company by market value won't meet its full-year sales target, Hong Kong's RTHK reported yesterday, citing the company's president. The company pushed back sales of some properties in the southern Chinese province of Guangdong and is unable to predict property price movements next year, President Cui Jianbo was quoted as saying.

Cosco Pacific Ltd., Asia's third-largest container-terminal operator, plunged 11 percent to HK$6.20 after Goldman, Sachs & Co. trimmed its share-price estimate by 39 percent because of the company's ``short-term earnings risks,'' according to a research note today.

All but three stocks on the 42-member Hang Seng Index declined. November futures slipped 7.2 percent to 13,713.

The following stocks rose, fell or were suspended. Stock symbols are in brackets after company names.

China Molybdenum Co. (3993 HK), a mainland Chinese producer of the metal used in steelmaking, tumbled 34 cents, or 12 percent, to HK$2.61. Morgan Stanley lowered its rating on the stock to ``equal-weight'' from ``overweight'' because the brokerage cut its forecast for the price of the metal, according to a research note.

China Railway Construction Corp. (1186 HK) advanced 31 cents, or 3.5 percent, to HK$9.08. The company said yesterday its 2008 earnings and future developments won't be affected by the halt of a Nigerian railway project.

Jiangxi Copper Co. (358 HK), China's second-biggest smelter by 2007 output, retreated 18 cents, or 4.2 percent, to HK$4.10. The company may lose between 452 million yuan ($66 million) and 904 million yuan from futures trading this year, Berry He, an analyst at Morgan Stanley said in a research note today.

Semiconductor Manufacturing International Corp. (981 HK) halted trading of its shares pending release of price-sensitive information related to a stake sale, according to a statement. China's biggest chipmaker said it will issue new shares to a strategic investor as the company seeks partners that will help it boost orders. The stock last traded at 15.5 Hong Kong cents.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net.