Hong Kong shares slumped 4.04 percent to a three-week low yesterday on worries over a prolonged global recession, but the Hang Seng Index (HSI) held at above 12,000 points when blue-chip property stocks made a slight recovery late in the session.

The benchmark HSI closed at 12,298.56 points, down 517.24 points or 4.04 percent with all stocks across the board making heavy losses. The index had fallen to 11,976.88 points earlier.

Analysts predicted that the main index may drop back to the 10,676-point level in the near future or even lower with more bad news coming from listed enterprises.

"I expect more lay-offs and loan problems when the economy continues to slow and the bad news will drag share prices down," Patrick Shum, senior analyst at Karl Thomson, said.

"It was certainly a rebound when the index jumped back to 15,000 points earlier, but I can see the index will continue to drop. If the economy continues to deteriorate, I won't be surprised if the index drops below 8,000 points," he said.

Cheung Kong Holdings, a property flagship owned by billionaire Li Ka-shing, closed up 0.5 percent at HK$65.3 after sliding 6.3 percent earlier.

Like other property stocks, Sun Hung Kai Properties, the local leading property developer, also closed 5 percent lower.

It fell 8.2 percent during the day to a new low of HK$48.95 in five years.

"Property stocks will continue to be weak. The developers' profits are made upon re-valuations these days," Shum said.

"When their properties or assets are valued down, their profits will be down accordingly, the same as their share prices," he added.

Mainboard turnover rose to HK$44.6 billion from HK$38.9 billion on Wednesday.

The China Enterprises Index, which comprises top locally listed mainland firms, dived 4.6 percent to 6,190.90.

The third largest mainland lender, China Construction Bank, fell 4.27 percent to HK$3.59 on worries that Bank of America may sell some of its holdings in the bank due to the US credit crisis.

Top lender Industrial and Commercial Bank of China fell 6.6 percent while the mainland's largest insurer China Life dipped 4.6 percent.

"We are not sure about how the 4-trillion yuan stimulus package can actually help mainland banks at the moment," Shum said.

"With the slowing economy and weak property market, we can expect more bad debts and loan growth for banks will be difficult. I suggest investors keep these shares for at least two to three years," he said.

(HK Edition 11/21/2008 page2)