Hong Kong shares close lower as properties turn weak, offsetting China banks

Share prices closed lower as property stocks turned weak in late trade, offsetting gains in China banks following positive 2007 earnings guidance from China Merchants Bank.

Cathay Pacific was up after China Eastern Airlines' (CEA's) minority shareholders rejected the mainland carrier's proposed stake sale to Singapore Airlines (SIA) and Temasek Holdings.

Cathay said it will consider joining Air China and its parent China National Aviation Corp for a potential strategic partnership with CEA if the SIA-Temasek deal is rejected by CEA shareholders.

Air China fell sharply despite the prospect of a counter-bid for the CEA stake.

Among other stocks in focus, China Coal was up over 2.6 pct after announcing plans to issue up to 1.525 bln A-shares for a listing in Shanghai. The company also forecast over 87 pct rise in 2007 net profit.

The Hang Seng index closed down 66.59 points or 0.25 pct at 27,112.9, off a low of 27,088.7 and high of 27,637.6.

Turnover was 114.87 bln hkd.

The property sub-index was down 457.39 points or 1.19 pct at 37,995.07, reversing early gains.

China Merchants Bank closed up 0.9 hkd or 2.99 pct at 31.0, China Construction Bank was up 0.21 hkd or 3.5 pct at 6.21, ICBC was up 0.03 hkd or 0.57 pct at 5.3 and Bank of China added 0.01 hkd or 0.27 pct at 3.66.

China Coal was up 0.65 hkd or 2.63 pct at 25.4, off a high of 26.3.

Cathay Pacific finished up 0.25 hkd or 1.25 pct at 20.25, while Air China was down 0.32 hkd or 3.04 pct at 10.2.