* Hong Kong's HSI index down 1.8 pct
* China's CSI300 falls 3.25 pct
* Property, finance shares hit
* Mainland investors concerned about policy tightening
(Updates to close)
By Donny Kwok
HONG KONG/SHANGHAI, Feb 21 Hong Kong and China
stocks fell on Thursday, with a key mainland index suffering the
biggest intraday drop in over a year, on worries about monetary
tightening by the Chinese central bank in the months ahead and
further curbs on the property sector.
China's CSI300 index, which tracks the largest
listed firms in Shanghai and Shenzhen, slid 3.4 percent, its
biggest intraday decline since late 2011. The blue chip Hang
Seng lost 1.7 percent to end at 22,906.67, its lowest
closing since the year began.
Moves by China's central bank to aggressively drain funds
from the interbank market startled mainland investors, said Chen
Shaodan, analyst at New Times Securities, and led to a selloff
on fears that a sustained drain on liquidity is in the offing,
which could depress stock prices.
The China Enterprises Index of the top Chinese
listings in Hong Kong fell 2.2 percent and the Shanghai
Composite Index ended down 3 percent at 2,378.8, its
lowest close since late January.
The property sector took a hit after China's cabinet on
Wednesday restated its intention to extend a pilot property tax
programme to more cities and urged local authorities to impose
price control targets on new homes.
In Hong Kong, the blue chip property sub-index fell
1.5 percent to its lowest close so far in 2013 with Cheung Kong
(Holdings) Ltd losing 2.4 percent, Sun Hung Kai
Properties falling 1.5 percent, and New World
Development Co Ltd sliding 2.5 percent.
"The selling pressure was a bit overdone and investors
trimmed their holdings in whichever stock they think is
overvalued," said Alex Wong, a director at Ample Finance Group.
"But players were also cautiously doing bottom-fishing, and that
suggest that their risk appetites are still there."
China Overseas Land, which has dropped 5 percent
so far this year, gained 0.9 percent on Thursday, while China
Resources Land climbed 1.4 percent.
Shares of Belle International Holdings Ltd dived
as much as 18 percent after China's top footwear retailer said
its 2012 profit would come in at the lower end of estimates,
just marginally higher than in 2011.
"The reason for the drop was due to overestimation of sales
results by analysts," said Patrick Yiu, a director at CASH Asset
Management. "Most of the analysts were still quite bullish on
the China retail sector."
Belle shares, which closed at a record high on Wednesday,
ended down 16.8 percent at their lowest close since November
2012. Smaller rival Daphne International Holdings Ltd
also fell 6.4 percent.
However, investors were keen to bet on fundamentally strong
companies. Shares of Italian fashion house Prada SpA
rose 5.2 percent, in the second straight day of gain, to end at
their record close, as consumer confidence in the world's second
largest economy improves.
Goldman Sachs reiterated a "buy" rating on the stock after
the luxury bags maker posted strong revenues growth.
Macau gambling stocks remained weak for the third
consecutive day as analysts said short-term consolidation may
last one to two months as the sector pulls back from recent
The People's Bank of China let a net 910 billion yuan
($145.89 billion) drain from the interbank market this week.
In addition, the central bank this week returned to using
longer-term forward repos to drain funds, instead of reverse
repos which inject funds, for the first time since June.
But money market dealers in China's interbank market said
that the PBOC operations were mostly intended to offset the
record-high injection the central bank made prior to the Chinese
Spring Festival holiday, which saw markets close for a week.
Money rates increased slightly but liquidity remained ample,
dealers said, thanks to the influx of funds flowing into the
market as a result of foreign exchange purchases by the central
($1 = 6.2376 Chinese yuan)
(Additional reporting by Chen Yixin and Gabriel Wildau; Editing
by Pete Sweeney and Sanjeev Miglani)