HK shares drop after gaining streak, but telecoms up

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

By Rita Chang

HONG KONG, Feb 18 (Reuters) - Hong Kong stocks fell on
Monday, as a four-day gaining streak prompted investors to book
profits across the board, while global lender HSBC Holdings plc
(0005.HK: Quote, Profile, Research, Stock Buzz) sank further amid deteriorating credit markets.

Telecom stocks dominated trade, with China Netcom (0906.HK: Quote, Profile, Research, Stock Buzz)
hitting all-time highs amid talk of a government meeting over
the weekend to discuss the industry's long awaited
consolidation.

Hong Kong initially rose in line with other Asian equity
markets but eased on the approach of 23,500 points.

"The theme today is profit-taking," said Jackson Wong,
investment manager at Tanrich Securities. "People are sceptical
at these levels. We could see more profit-taking in the
afternoon, if Europe doesn't do well."

Wong said Hong Kong was looking to Europe in the absence of
guidance from U.S. financial markets, which are closed for a
holiday on Monday.

The benchmark Hang Seng Index .HSI had fallen 0.9 percent
to 23,930.09 by lunch. The China Enterprises Index of Hong
Kong-listed mainland companies .HSCE, or H shares, shed 0.7
percent to 13,747.80.

Mainboard turnover was HK$47.1 billion (US$6.0 billion),
compared to Friday morning's HK$40.1 billion.

HSBC slid a further 1.7 percent to HK$112.8. Bank of East
Asia (0023.HK: Quote, Profile, Research, Stock Buzz), which reported in-line earnings last Friday,
also fell further amid expectations of more writedowns for its
collateralised debt obligation holdings hit by the U.S. subprime
crisis. Its shares ended down 2 percent at HK$40.80.

Investors remain skittish about credit markets after a
credit ratings downgrade hit bond insurer FGIC, which could lead
to more write-downs at banks that own securities covered by the
company.

Among telecom plays, China Telecom (0728.HK: Quote, Profile, Research, Stock Buzz) rose 2.7
percent to HK$6.37 in heavy trade. The country's fixed-line
provider is seen as a key beneficiary of an industry alignment
because it would gain entry to the more lucrative wireless
market.

China Mobile (0941.HK: Quote, Profile, Research, Stock Buzz) fell 1.2 percent to HK$119. The
industry reshuffling would benefit China Mobile the least
because it would usher in more competition, possibly eroding its
dominant position.

China Unicom (0762.HK: Quote, Profile, Research, Stock Buzz), which is positioned to sell part of
its cellular operations to China Telecom, also saw heavy trade,
edging up 0.1 percent to HK$19.46, having earlier tapped highs
unseen since July 2000.

Fixed-line operator China Netcom (0906.HK: Quote, Profile, Research, Stock Buzz) gained 0.6
percent to HK$25.95.

Chinese property developer Country Garden Holdings Co Ltd
(2007.HK: Quote, Profile, Research, Stock Buzz) surged 10.3 percent to HK$7.4 in resumed trade after
saying it plans to issue 3.595 billion yuan ($500.8 million)
worth of 2.5 percent convertible bonds due 2013, to raise
capital to repay debt and fund new and existing projects
[ID:nHKG332297].

Investors pocketed gains in recent high-flyers such as China
Shipping Container Lines Co (CSCL) (2866.HK: Quote, Profile, Research, Stock Buzz), which dropped 3.5
percent to HK$3.58. Mainland banking shares also lost some of
their recent lustre. Bank of Communications (3328.HK: Quote, Profile, Research, Stock Buzz) slid
nearly 2 percent to HK$9.33 and Bank of China (3988.HK: Quote, Profile, Research, Stock Buzz) declined
1.6 percent to HK$3.09.
(US$1=HK$7.8)
(Editing by Anne Marie Roantree)