Hong Kong shares outlook - Lower on Wall Street's fall, record oil prices

Hong Kong shares may trade lower on Thursday, tracking Wall Street's decline overnight after a weaker-than-expected reading on the US manufacturing sector and a spike in oil prices sparked fears the economy could be slowing at a quicker pace than most investors had anticipated.

The Institute for Supply Management reported the manufacturing index fell to 47.7 percent for December from 50.8 percent in November. A reading below 50 signals economic contraction, whereas readings over 50 indicate expansion.

Analysts polled by Thomson/IFR had anticipated that manufacturing would expand modestly in December.

"Investors are in a bearish mood because the economy is showing signs that the subprime and credit problems in the US are spreading and no one can tell how much further the situation will worsen," said Ben Kwong, chief operating officer at KGI Asia.

"Rising oil prices compounded worries about the a slowing global economy. There are more bad news than good too early in the year," he said.

On Wednesday, the Hang Seng index closed down 252.13 points or 0.91 pct at 27,560.52, off a low of 27,299.45 and a high of 27,853.60.

Turnover was 75.87 bln hkd.

Oil and airline stocks will be in focus in today's trade after crude oil prices touched 100 US dollars a barrell for the first time, as violence continued in Nigeria.

Airline stocks may fall as rising crude prices are likely to drive up operating costs for airlines, limiting earnings growth. Chinese banking stocks could rise after China's banking regulator said Chinese banks' sales of private wealth management products last year may have reached 1 trillion yuan as lenders seek to broaden sources of revenue. Banks' sales, which include mutual funds and investments overseas on behalf of clients, reached nearly 600 billion yuan in the first nine months of 2007, the China Banking Regulatory Commission said.

(1 US dollar = 7.8 Hong Kong dollars)