Hong Kong stocks continue to fall on fears of sub-prime crisis

Hong Kong shares continued to drop for the third straight day last Friday, amid the concerns over the global credit crisis and high expectations of interest rate hike in the Chinese mainland.

The benchmark Hang Seng Index fell to 27,563 points, down 181 points or 0.65% over the previous trading day. The China Enterprise Index, which covers the Chinese state-owned enterprises listed on the Hong Kong Stock Exchange, lost 375 points, or 2.3%, to close at 15,957 points.

The trading turnover on the bourse shrunk to HK$111.8 billion from Thursday's 117.3 billion.

The market was dragged down by news on the sub-prime mortgage crisis. The U.S. Citigroup Inc announced to inject totally US$49 billion into its seven structured investment vehicles (SIVs) to help them to repay the debts. The Moody's Investors Service lowered Citigroup's long senior rating from "Aa3" to "Aa2".

The sentiment on the Hong Kong Stock Exchange was also weighed down after Joseph Yam, chief executive of Hong Kong Monetary Authority, said that some Hong Kong banks might post losses or lower profits due to the investment in the sub-prime mortgage in the U.S.

Despite the slump of the benchmark index, the heavyweight HSBC Holding<5>, the largest local bank in Hong Kong, gained HK$0.4 to close at HK$133.6, driven by the news that it agreed to acquire the Taiwan-based The Chinese Bank.

Most banking stocks went down. The Industrial and Commercial Bank of China (ICBC)<601398><1398>, the country's largest lender, lost 3.4%, or HK$0.2 to HK$5.72, while China Construction Bank<601939><939>, another Chinese state-owned Big Four bank, dropped 2.4%, or HK$0.17, to HK$6.8.