HK shares sink before Fed decision, China Life sags

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By Rita Chang

HONG KONG, Jan 30 (Reuters) - Hong Kong stocks tumbled on
Wednesday, surrendering earlier gains as investors booked profits
before a widely expected rate cut by the Federal Reserve.

Weak mainland stock markets were also a drag on the market.
Chinese life insurers suffered sharp losses, with Ping An
Insurance (2318.HK) down for a third straight day amid
uncertainties about its fundraising efforts, while rival China
Life (2628.HK) paced sharp losses in its Shanghai-listed shares.

Financial markets see a three-in-four chance that the Federal
Reserve will lower benchmark overnight rates by a half-percentage
point to blunt an economic slowdown. But analysts say markets
still have to contend with the poor macro picture.

"The news flow is still bad," said Ernie Hon, strategist at
ICEA Securities. "Even if the Fed cuts by 50 basis points, it's
more or less priced in, and whatever the Fed does, the U.S.
market will fall because it's gone up the last two days."

The market opened on a sure footing but by mid-morning had
drifted into negative territory.

The benchmark Hang Seng Index .HSI settled near the bottom
of the day's range, closing down 2.6 percent, or 638.11 points,
at 23,653.69. The China Enterprises index of H shares .HSCE, or
Hong Kong-listed shares in mainland companies, fell 4.7 percent,
or 623.77 points, to 12,755.41.

In the near term, the market should resume its downtrend
ahead of the Chinese New Year long holiday next week, Hon said.

China Life, the day's top traded stock and blue chip loser,
tumbled 7.4 percent to HK$29. Ping An slumped 6.5 percent to
HK$57.4 amid uncertainties surrounding its roughly $20 billion
capital-raising plan. A report last week said Beijing would block
the life insurer's offer to sell new shares in Shanghai and
convertible bonds [ID:nSHA17747]

Bourse operator Hong Kong Exchanges and Clearing shares
(0388.HK) tanked 6.4 percent to HK$166.5 as turnover shrinks
sharply from last year's levels.

Apparel retailer Esprit Holdings Ltd (0330.HK) sank nearly 5
percent to HK$93.55. The Europe-focused apparel retailer racked
up huge gains on Tuesday ahead of its first-half earnings report
due later in the day.

Defensive plays were among the day's rare gainers. Power
companies CLP Holdings (0002.HK) rose 1.8 percent to HK$61.75 and
Hong Kong Electric (0006.HK) climbed 1 percent to HK$44.15.

China Oilfield Services Ltd (2883.HK) surged 6.3 percent to
HK$13.82 after saying late on Tuesday it estimated net profit
would increase by about 95 percent in 2007 from a year ago. The
financial data is unaudited and prepared in accordance to Chinese
accounting standards.

Mainboard turnover was HK$105.1 billion (US$13.5 billion)
compared to Tuesday's HK$92.6 billion.
(US$1=HK$7.8)
(Editing by Anne Marie Roantree)