Hong Kong stocks down after Wall Street slump

Hong Kong stocks dropped sharply Friday, tracking Wall Street lower as investors sold energy-related stocks.

The blue-chip Hang Seng Index lost 347.01, or 1.5 percent, to 22,740.71 points. It erased some of its losses as traders bought or covered shorts near the market's close, analysts said. The benchmark fell 0.2 percent the prior session.

Wall Street's weakness drove much of the selling.

U.S. investors were troubled by data showing a worse-than-expected decline in existing home sales in June _ a fresh reminder of problems with bad mortgage debt and tight credit. Oil's overnight uptick, as well as a rise in claims for unemployment benefits, added to worries.

After Hong Kong's recent gains, many investors decided it was time to take profits, analysts said. While there was still some support above 22,000, the market's performance could be shaky in coming days, hinged partly on oil prices and cues from the U.S.

"There is no clear universal consensus as to the direction of the this market, so that means volume could be low and positions will be short term, and that will mean volatility," said Benjamin Collett, head of hedge fund sales trading Daiwa Securities SMBC Co.

Coal companies took a drubbing after reports said Beijing will tighten controls on coal prices. China Shenhua slid 6.7 percent to HK$29.1; Yanzhou Coal was off 6 percent to HK$13.46.

Oil stocks also were down as oil prices steadied. Upstream producer CNOOC slipped 3.6 percent to HK$11.24. PetroChina lost about 3.1 percent to HK$10.18.