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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)