HK shares crushed, China plays suffer steep losses

(For Shanghai stock market reports, click [.SS])
(Adds Tuesday lunch close, details)

By Rita Chang

HONG KONG, Jan 22 (Reuters) - Hong Kong stocks dived on
Tuesday as recession fears gripped investors, sending China plays
down nearly 12 percent to mark their worst percentage loss in 10
years.

Blue chips also plummeted, ending the morning down 8 percent
to break below the 22,000-point key level for the first time
since August when the subprime debacle roiled financial markets.

"What this tells us is subprime is nowhere near contained,"
said Andrew Clarke, a trader at Societe Generale Securities.

"People have been burying their heads in the sand, and
reality is just hitting. What governments have got to do is to
limit the damage -- they better come up with something quickly or
else we'll go into a full-blown bear market."

The benchmark Hang Seng Index .HSI broke its 250-day moving
average, a key support level, early in the session. Before the
morning ended, the market had breached 22,000 points, a key mark
that some analysts say must be tested before a rebound occurs.

The China Enterprises Index of Hong Kong-listed mainland
companies .HSCE, or H shares, suffered its sharpest drop since
Jan. 1998 before ending the morning at at 11,937.25.

Mainboard turnover was HK$83 billion (US$10.6 billion),
compared to Monday morning's HK$57.3 billion.

As investors nervously eye the opening of the U.S. market,
which was closed on Monday for a holiday, some market
participants said technicals may cause a rebound.

"There'll be a point when technicals will come in," said Matt
McKeith, head of equity dealing at First State Investments.

"(But) if you buy before the U.S. opens, it's just taking a
gamble."

China plays, which had been the market's top performers, were
the hardest hit.

Mainland financials led the losses again, with the index of
Hong Kong-listed mainland financials .HSCIF sliding 9.1
percent.

Life insurer China Life (2628.HK) was the top loser with a
14.8 percent plunge to HK$28, while rival Ping An Insurance
(2318.HK) was close behind, sinking 11.8 percent to HK$60.

The insurer said it would sell as many as 1.2 billion new
local shares and up to 41.2 billion yuan of convertible bonds
with warrants. [ID:nSHA31337]

Wireless operator China Mobile (0941.HK), the morning's most
active stock, tanked 6.5 percent to HK$110.10.

Global bank HSBC Holdings plc (0005.HK) fell to its lowest
since Oct. 2003, before ending the morning down 6.3 percent at
HK$106.4.

China Eastern Airlines Corp Ltd shares (0670.HK) tumbled 16.8
percent to HK$5.6 in resumed trade a day after it snubbed an
approach by bigger rival Air China's parent to buy a $2 billion
stake. China Eastern also predicted it would post a net profit
for 2007, recovering from a 2.78 billion yuan (385 million) loss
in 2006.

Shares in bourse operator Hong Kong Exchanges and Clearing
(0388.HK), a gauge of market sentiment, fell 8.6 percent to
HK$158.50.
(US$1=HK$7.8)
(Editing by Anne Marie Roantree)