Hong Kong stocks fall on telecom deals

Hong Kong stocks declined Tuesday as telecom companies plunged a day after two major deals were announced in a government shake-up of the telecommunications industry.

Wall Street's overnight weakness also hurt sentiment. Two key economic reports showed the U.S. economy is still struggling.

The blue-chip Hang Sang Index fell 455.6 points, or 1.8 percent, to 24,375.76.

On Monday, mobile carrier China Unicom Ltd. unveiled plans to take over China Netcom Group Corp. Ltd. in a share swap valuing the fixed-line operator at HK$185 billion (US$23.8 billion; euro15.33 billion). The company also said it would sell part of its mobile business to landline provider China Telecom Corp.

All three companies' stocks resumed trading Tuesday after being suspended since May 23, when details of the government restructuring plan first surfaced.

China Unicom tanked more than 14 percent to HK$15.88 as Credit Suisse and Morgan Stanley downgraded the company after the deals were announced. China Netcom lost 12.75 percent to HK$23.6. China Telecom tumbled 12.7 percent to HK$4.95.

Their shares rose sharply before the government's announcement, and now many investors were locking in gains, analysts said.

"The market was going up aggressively before. Now everyone is selling on news," said Nicholas Yeo, an investment manager at Aberdeen Asset Management in Hong Kong.

China Mobile, the country's No. 1 mobile company, slid 2.2 percent to HKD$115. Its shares have taken a beating, losing more than 13 percent in recent days on fears the restructuring plan will create more competition and dent its profits.

Oil stocks also finished lower on supply concerns after oil inched higher on Monday, although crude prices fell back in Asian trading Tuesday.

PetroChina sank more than 4 percent to HK$11 and Sinopec lost 3.4 percent to HK$7.87. Upstream oil producer CNOOC slipped 1.9 percent to HK$13.82.

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