HK stocks seen dropping but commodities may edge up

HONG KONG (Reuters) - Hong Kong stocks should fall in line with world equity markets on Wednesday, as investors brace for a possible U.S. recession, but metal producers could gain after spot gold XAU= jumped to a record high and copper rallied.

Trading in shares of China Eastern (0670.HK) resumes on Wednesday after shareholders rejected a deal to sell a US$920 million stake to Singapore Airlines (SIAL.SI).

"We'll follow the overseas markets," said Steve Leung, director at UOB Kay Hian Holdings.

"We'll drop 1.5 to 2 percent. But the situation will only bring in more room for more rate cuts, so it's not all that bad. There will still be buying interest in rate-sensitive stocks like properties."

The benchmark Hang Seng index .HSI fell 0.3 percent to 27,112.90 on Tuesday. The China Enterprises Index of Hong Kong-listed mainland companies .HSCE gained 0.4 percent to 15,659.71.

STOCKS TO WATCH:

* Shareholders in China High Speed Transmission Equipment (0658.HK) were selling up to about US$208 million worth of shares in the country's top wind power transmission gear maker at between HK$17.88 and HK$18.64 per share at a discount of between 3 to 7 percent to Tuesday's closing price, according to a term sheet. UBS (UBS.N) was handling the deal.

* Parkson Retail Group Ltd (3368.HK) said on Wednesday its controlling shareholder planned to sell up to 8 million shares, or 1.44 percent of the company, at about HK$78.66 per share. BNP Paribas Capital and JPMorgan Securities are the placing agents.

* China Financial Leasing Group (2312.HK) said on Wednesday it estimated its second-half net profit would increase by 4 times against HK$5.4 million net profit in the first half of 2007 as the company repositioned its business focus on the China financing leasing market. For detail please see: