Profit-taking hits Hong Kong

THINGS have not turned out quite as planned this week in Hong Kong, where it was expected that the annual results of banking giant HSBC would buoy the markets as it continued its rise to 12-month highs in the weeks before it unveiled its figures.

HSBC duly played its part with a record-breaking £7.7bn profit, but there began the departure from the script as investors took profits, pushing the shares down.

They were still falling today, off a further 2.4% to HK$123. Smaller sister Hang Seng Bank also suffered, its shares 2.8% lower at HK$102.50.

Currency concerns were also playing on the minds of investors. Hong Kong, with its peg to the greenback, reacts differently to movements in the dollar from the rest of Asia.

A strengthening US currency ignites fears that funds will begin to flow out of the territory and with the dollar at three-month highs against the euro for the second day, those fears came into play.

The Hang Seng index fell 257 points, 1.9%, to 13,474.5, with the financial sector bearing the brunt.

Bank of China's Hong Kong arm BOC Hong Kong fell 0.65% to HK$15.20.

The property sector was mixed, Sun Hung Kai down

1.3% at HK$74.00, but MTR, the territory's mass transit system operator, was up 0.4% at HK$12.20. It is usually considered a property play because it derives much income from property above the rails.

In Tokyo, reaction to renewed signs of life in the greenback was the opposite and helped push shares up for the sixth session in a row, although the Nikkei later gave up those gains to close 9.59 points down at 11,351.92.

Exporters were the main beneficiaries of currency issues, with carmakers all up. Toyota rose 1.5% to 3960 yen (£19.60), Honda 1.8% to 4970 yen and Nissan 0.5% to 923 yen. Electronics stocks also improved, Sony up 0.9% at 4600 yen and Toshiba rising 0.9% to 465 yen.

An optimistic outlook for sales at Nikon, which now expects operating profits of up to 35bn yen this year, pushed the stock nearly 4% higher to 1411 yen. If it achieves that it will be a turnaround from the expected one billion yen profit of the current year. The banking sector was also optimistic and Mizuho Financial Group was 5.2% better at 363,000 yen.

Singapore suffered from nerves over Wall Street's performance and the Straits Times index was down five points at 1887.5. The banking sector suffered most, DBS shares falling 1.4% to S$14.20.

Traders reported poor sentiment and predicted that the sell-off could continue. Even news that Keppel Corporation could pay a special dividend after selling its fleet of feeder ships failed to rally the stock, which was flat at S$7.50.

However, there were signs of life in the technology sector, Chartered Semiconductor rising 1.8% at S$1.73 and in property with developer City Developments up 1.6% at S$6.45. The shares have been in favour since late last week when the company announced a special dividend despite a drop in profits.

In Sydney continued confidence in the mining sector and relief that the central bank left interest rates unchanged failed to help the All Ordinaries index, which closed just 0.80 points up at 3399.0.

Aluminium producers led resources stocks higher on the back of soaring prices. Alumina stock was up 2.3% at A$5.82. Shares in CSR, which also produces building materials and sugar, rose 2% to A$1.94 and Capral Aluminium was up 2.8% at A$2.95.