HK shares hit 7-wk lows, Honghua fizzles on debut

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

By Rita Chang

HONG KONG, March 7 (Reuters) - Hong Kong blue chips sank 2.9
percent on Friday as further signs that the U.S. was headed into
recession sent investors running for cover, souring the debut of
Chinese oil rigs manufacturer Honghua Group Ltd (0196.HK: Quote, Profile, Research, Stock Buzz).

Oil refiner Sinopec Corp (0386.HK: Quote, Profile, Research, Stock Buzz) skidded on a broker
downgrade, which comes after China earlier this week ruled out
increases soon in oil product prices [ID:nL05781328].

Hong Kong Exchanges and Clearing (0388.HK: Quote, Profile, Research, Stock Buzz), a barometer of
investor sentiment, sank 3.7 percent to HK$137.80, tapping levels
not seen since August.

"The U.S. is in deep water; sentiment across Asia is dim; no
one is buying," said Jackson Wong, investment manager at Tanrich
Securities. "Unless there's some good news, people will play the
wait-and-see game to see if the U.S. can survive."

The benchmark Hang Seng Index .HSI had fallen to 22,678.16
by lunch, having earlier hit lows not seen since Jan 22.

The China Enterprises Index of Hong Kong-listed mainland
companies .HSCE, or H shares, fell 3.1 percent to 12,663.41.

Mainboard turnover was HK$40.8 billion (US$5.2 billion), in
line with Thursday morning's HK$40.2 billion.

The rebalancing of the Hang Seng Index is due to occur on the
day's close. Global bank and heavyweight HSBC Holdings plc
(0005.HK: Quote, Profile, Research, Stock Buzz) will see its weighting trimmed slightly to a cap of 15
percent.

HSBC was a big drag on the blue chips, ending the morning
down 2.5 percent at HK$118.50. The British bank tracked global
lenders as the mess in the U.S. mortgage market piled higher and
the resulting credit crunch worsened.

Newcomer Honghua wilted shortly after the open, closing the
morning at HK$3.64, 5 percent lower than its HK$3.83 IPO price.

Sinopec sank 7.2 percent to HK$7.60. Goldman Sachs downgraded
the stock to neutral from buy, citing margins squeeze as
adjustments to domestic refined products are seen lagging
projected oil price increases [ID:nHKG220471].

Sun Hung Kai Properties (0016.HK: Quote, Profile, Research, Stock Buzz), Asia's top developer by
market value, dropped 5.4 percent to HK$125.60.

Citigroup downgraded the stock to sell from hold, saying
cutbacks in completions would weigh on growth [ID:nHKG144768].

The developer reported a 17 percent rise in half-year
earnings on Thursday, beating expectations, thanks to an upswing
in Hong Kong home sales.
(US$1=HK$7.8)
(Editing by Anne Marie Roantree)