HK shares expected to tumble on oil price surge

HONG KONG, June 10 (Reuters) - Jittery investors are expected to exit their holdings in the Hong Kong market on Tuesday after record crude oil prices sent U.S shares crashing at the end of last week and more liquidity tightening measures on the mainland.

Traders in Hong Kong are preparing for a broad sell-off, with ADRs of local companies closing on Monday well below their close in Hong Kong on Friday, the last day of trade for local markets due to a public holiday.

"The main index will fall below 24,000, with financials taking the lead after the Lehman news. It will be a terrible day," said Francis Lun, general manager with Fulbright Securities.

U.S. securities firm Lehman Brothers LEH.N forecast on Monday it would post a record $2.8 billion in second quarter losses. Lehman, which brought its earnings announcement forward from its scheduled June 16 date, also raised $6 billion though a public offering.

Oil prices barrelled through $139 on Friday, surging $11 a barrel after the Us dollar hit a six-week low against the euro, sending the Dow to its lowest in 15 months [ID:nN06363333].

Major Asian markets joined the sell-off when they re-opened after the weekend, as investors speculated the begining of another down cycle in the global markets.

U.S crude declined more than $4 a barrel on Monday and the Dow staged a modest rebound on better-than-expected sales figures from McDonald's Corp (MCD.N) and a surprising gain in pending home sales [ID:nN09294516]

In China, Beijing raised the reserve ratio requirement on banks for the fifth time this year, in keeping with its credit tightening agenda. The reserve ratio requirement for mainland lenders will go up 0.5 percent on June 15 and on June 25 to a record 17.5 percent.

The Hang Seng Index closed Friday up 0.61 percent at 24,402.18.

STOCKS TO WATCH.

* Financial stocks are expected to take a beating following Lehman Brothers' disappointing results and stronger speculation of an impending interest rate hike in the the U.S. Mainland banks will also come under pressure after the latest round of reserve ratio hikes.

* Oil stocks be in focus again with the offshore oil producer CNOOC (0883.HK) likely to gain on the oil price increase. Sinopec Corp (0386.HK) will retreat after Friday's 2.9 percent rally after Beijing signalled it will not do away with the price controls on refined products, according to a report in the South China Morning Post. The stock gained sharply in the previous session on talk that China may finally grant oil companies autonomy in pricing and helping reduce refining losses.

* Two new stocks Aluminum Corp of China (2600.HK) and Tencent (0700.HK) will join the Hang Seng Index today in place of PCCW (0008.HK) and Cheung Kong Infrastructure (1038.HK). ----------------------MARKET SNAPSHOT @ 2305 GMT ------------

INSTRUMENT LAST PCT CHG NET CHG S&P 500 .SPX 1361.76 0.08% 1.080 USD/JPY JPY= 106.35 0.07% 0.070 10-YR US TSY YLD US10YT=RR 4.019 -- 0.000 SPOT GOLD XAU= 892.2 0.03% 0.300 US CRUDE CLc1 135.29 0.70% 0.940 DOW JONES .DJI 12280.32 0.58% 70.51 ASIA ADRS .BKAS 159.95 -0.65% -1.05 -------------------------------------------------------------> US STOCKS-Dow bounces back on McDonald's and home sales [.N] > Oil falls $4 from record highs as dollar firms [O/R] > FOREX-FX remarks from Treasury, Fed boost dollar [USD/] > TREASURIES-Short-term yields jump on view Fed will tighten[US/] > Gold turns, ends lower on rising dollar, oil drop [GOL/] > SEA Stocks-Financials lead losses [.SO] (Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)