Share prices slumped Friday as market sentiment was also hurt by news that the central government unveiled fresh measures on Thursday to curb speculative demand on the real estate market in a bid to prevent a property bubble from forming.

The benchmark Hang Seng Index was down 292.56 points, or 1.32 percent to 21,865.26, ending the week 1.5 percent lower, its first weekly decline in three weeks.

The Hang Seng China Enterprises Index, which tracks the performance of major Hong Kong-listed mainland companies, dropped 256.48 points, or 2.0 percent to 12,557.40.

Dickie Wong, research director at Kingston Securities Ltd, explained the decline was partly a result of news about the central government's fresh tightening moves targeting the property market. "Sentiment was hurt by the news," he told China Daily.

Measures announced Thursday by the State Council include the requirement of at least a 50-percent down payment - up from 40 percent previously - for flat purchases by non-occupier buyers and higher mortgage rates for them.

But he expects the correction to run its course soon, believing that the benchmark index will find a strong support at around 21,500 points.

Mainland property developers led the fall on worries about weaker demand for flats following the tightening measures.

Wong believes that share prices of mainland developers have reflected the negative factor after recent falls.

Another analyst saw Friday's decline mainly as being mainly due to profit-taking after recent gains.

"We saw a normal correction today after share prices rose significantly recently," Linus Yip, a strategist with First Shanghai Securities Ltd, told China Daily.

The benchmark Hang Seng index has gained around 1,500 points from its recent low of 20,778.55 points on March 25.

The recent run-up in the market was mainly driven by speculation on yuan appreciation and anticipation of the launch of index futures contracts on the mainland, Yip said.

An appreciation or revaluation of the yuan could attract more overseas funds into the local stock market, which is considered to be a proxy for yuan assets.

Investors have also expected the Shanghai bourse to rally higher with the launch of index futures contracts, providing a positive lead to Hong Kong shares as it usually does.

However, the central government did not revalue the yuan after President Hu Jintao's meeting with US President Barack Obama earlier this week and the launch of the index futures contracts on Friday failed to boost the Shanghai bourse.

"The disappointment triggered the profit taking," First Shanghai Securities' Yip said.

Mainland banks also underperformed the broad market after news that the state pension fund, a major investor in domestic lenders, sold shares in Bank of China (BOC) and Industrial and Commercial Bank of China (ICBC) earlier this month.

China Daily

(HK Edition 04/17/2010 page3)