Hong Kong shares close sharply lower on US inflation, oil price concerns

Hong Kong shares closed lower, with the benchmark index falling below key support at 27,000 points, as investors sold shares across the board on growing concern that accelerating inflation in the US will make it difficult for the Federal Reserve to cut interest rates again.

Sentiment also took a beating after oil prices surged in afternoon trade in Asia after a snowstorm hit the northeastern United States over the weekend, raising expectations of higher heating oil demand.

The Hang Seng Index closed down 967.06 points or 3.5 percent at 26,596.58, off a low of 26,551.37 and a high of 27,245.51.

Turnover was 104.4 billion Hong Kong dollars.

"The higher-than-expected inflation data was discouraging for investors who were betting that the Fed would cut interest rates further next year," said Kenny Tang, associate director at Tung Tai Securities.

Inflation in the US climbed to a two-year high of 0.8 percent in November, discouraging investors from buying stocks.

Worst hit was the property sector, tumbling 2,244.05 points or 6.1 percent to 34,500.56. Previous cuts in the US Federal funds rate have supported rallies in the property sector.
The Federal Reserve has lowered interest rates by a cumulative one percentage point so far this year. The market hopes the Fed will cut rates further in the first quarter of next year to boost the economy and ease the credit crunch.

China stocks traded lower as investors continued to worry over further credit tightening measures on the mainland as the country's inflation in November hit an 11 year-high of 6.9 percent. Chinese banking and real estate stocks were mostly affected as a tight credit policy would limit growth in these sectors.

Uni-President China Holdings Ltd, the mainland unit of Taiwan conglomerate Uni-President Enterprises Corp, surged 12.6 percent to close Monday at 4.75 Hong Kong dollars on its trading debut in Hong Kong, compared with its offering price of 4.22 dollars.

GOME Electrical Appliances Holdings, China's top electronics retailer, bucked the broader market's weakness, rising 3.1 percent, as investors took a positive view of the company's decision to acquire Beijing-based appliance retailer Dazhong Electronics for 3.65 bln yuan.