Plus   Neg

Hong Kong Expected To Open Lower

The Hong Kong stock market on Monday wrote an emphatic finish to the three-day winning streak in which it had climbed more than 450 points or 2.1 percent. The Hang Seng Index finished just below the 20,625-point plateau, and now investors are bracing for further damage when the market opens on Tuesday.

The global forecast for the Asian markets remains bleak, thanks largely to concerns from Europe. Of concern, the Spanish economy slipped back into recession in the first quarter of 2012, fueling concerns that the country may fail to meet the deficit targets. On the political front, investors worried that the turmoil in the Netherlands may cause the country to lose its AAA rating. The European and U.S. markets finished firmly in the red, and the Asian bourses are tipped to follow suit.

The Hang Seng finished sharply lower on Monday following losses from the financial shares and telecoms.

For the day, the index plummeted 386.25 points or 1.84 percent to finish at the daily low of 20,624.39 after peaking at 20,970.96 on turnover of 43.60 billion Hong Kong dollars.

Among the decliners, China Mobile plunged 3.0 percent, while China Construction Bank shed 2.6 percent, Industrial and Commercial Bank of China lost 2.5 percent, Cheung Kong dropped 2.8 percent and Sino Land fell 2.5 percent.

The lead from Wall Street suggests further consolidation as stocks saw considerable weakness on Monday, although they ended the session well off their worst levels of the day. Troubling news from overseas weighed on the markets in early trading, but selling pressure waned as they day progressed.

Bank of Spain said that gross domestic product shrank 0.4 percent on quarter. This followed a 0.3 percent fall in the fourth quarter, which was the first decline in activity since the final three months of 2009.

Traders also reacted negatively to news that French President Nicolas Sarkozy came in second in a first round of voting, losing to socialist Francois Hollande. Sarkozy is expected to face an uphill battle in a run-off election against Hollande on May 6, raising concerns about a setback to efforts to diffuse the European debt crisis.

Among individual stocks, shares of Kellogg (K) came under pressure after the cereal market lowered its full-year 2012 financial guidance based on a weaker-than-expected first quarter performance. Kellogg fell by 6.1 percent to a two-month closing low.

Retail giant Wal-Mart (WMT) also posted a notable loss on the day, sliding by 4.7 percent after the New York Times reported on bribery allegations at the company's Mexico unit. Wal-Mart confirmed that it is probing possible violations of the U.S. Foreign Corrupt Practices Act.

Pfizer (PFE) posted a more modest loss after the drug giant announced that it has entered into an agreement to sell its infant nutrition business to Nestlé for $11.85 billion in cash.

The major averages climbed well off their lows for the session but still closed firmly in negative territory. The Dow closed down 102.09 points or 0.8 percent to finish at 12,927.17, while the NASDAQ fell 30.00 points or 1 percent to 2,970.45 and the S&P 500 dropped 11.59 points or 0.8 percent to 1,366.94.

On the economic front, Hong Kong's annual inflation accelerated as expected for March, the Census and Statistics Department said Monday. The composite consumer price index rose 4.9 percent year-on-year in March, in line with expectations, up from 4.7 percent in February. Netting out the effects of all government's one-off relief measures, underlying inflation was 5.6 percent, also larger than that the 5.4 percent in February.

Also, China's manufacturing activity shrank for a sixth consecutive month in April, but the pace of decline eased from a month earlier owing to slower contraction in output, new orders and employment, a key survey revealed Monday.

The HSBC/Markit purchasing managers' index rose to 49.1 in April from 48.3 in March. However, the reading below 50 still indicated a contraction in activity.

The manufacturing output index also remained below the neutral mark at 49.1, up from 47.3 in March. The rate of decline in overall new orders and new export orders eased in April, according to the report. Employment also contracted at slower pace compared to March.

by RTTNews Staff Writer

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