HK shares tumble, Chinese investment hopes tempered

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By Rita Chang

HONG KONG, Nov 16 (Reuters) - Hong Kong blue chips fell a
further 4 percent on Friday because of sharp Wall Street losses
and fears that a scheme to funnel investment from Chinese
citizens to the city's stock market will bring in much less than
originally expected.

Heavyweight favourite China Mobile (0941.HK) was down 6
percent at one point, as the broad sell-off deleted gains from a
strong rebound two days earlier.

Hong Kong-listed mainland companies underperformed with a 4.3
percent loss as mainland lenders were knocked by fears that more
interest rate rises by China's central bank would dampen their
business growth.

News that China's central bank had ordered lenders in the
southern city of Shenzhen to limit cash withdrawals by residents
to curb fund flows to the city's stock market added to the
negative mood [ID:nSHA178559].

Meanwhile, a spate of media and analyst reports on Friday
said the amount of money mainland retail investors would be able
to invest in the so-called 'through train' programme next year
would be far less than the $60 billion touted by some analysts.

HSBC estimated only $27 billion would enter the Hong Kong
stock market next year in the scheme. [ID:nHKG148000]

Hong Kong-listed mainland Chinese firms rallied 87 percent
from the Aug. 20 announcement of the scheme to a peak on Oct. 30,
but have lost nearly half those gains since, as investors began
to temper their expectations for the "through train" scheme.

"We probably got ahead of the story," said Tat Auyeung, fund
manager at APEX Capital Management. "When liquidity isn't there,
people focus on the fundamentals, global economics and
inflation," he said.

"If stocks don't move higher, we have a problem. Funds will
be sitting on losses at the end of the month."

The market fell for a second straight day, with the benchmark
Hang Seng Index .HSI closing below its 50-day moving average,
ending 1,136.78 points lower at 27,614.43. It ended a volatile
week down 4.1 percent.

The China Enterprises index of H shares .HSCE, or Hong
Kong-listed shares in mainland companies, fell 747.73 points to
16,737.73, below its 60-day moving average for a 5.5 percent
weekly loss.

Some analysts said the market was due for a bounce, given its
oversold position. Still, if the 27,000 level is breached, then
the market should find support at 25,000 points, which is near
its 100-day moving average.

Morgan Stanley said it was revising its recommendations in
emerging market equities, downgrading China .MSCICN to
underweight from equal-weight, citing the potential for
stepped-up monetary tightening, among other factors.

China Mobile, the world's top wireless carrier and the day's
most active stock, ended down 4.6 percent at HK$133.20, having
touched HK$131.30 during the day.

Top oil producer PetroChina Co Ltd (0857.HK) was off 4.5
percent to HK$14.6. Offshore oil specialist CNOOC Ltd (0883.HK)
tanked nearly 7 percent to HK$12.40.

Shares in HKEx, a barometer of market sentiment, were slammed
5 percent to HK$235, reversing Thursday's gains on its stellar
third-quarter earnings.

Among mainland lenders, China Construction Bank (0939.HK)
dropped nearly 5 percent to HK$7.44 and Industrial & Commercial
Bank of China (1398.HK) clocked a 5.2 percent loss to HK$6.07.

Mainboard turnover was HK$138.3 billion (US$17.7 billion)
compared to Thursday's HK$119.7 billion.
(US$1=HK$7.8)

(Editing by Dominic Whiting)