H.K. INVESTORS UNLOAD HOLDINGS AFTER STOCK ISSUES
Investors are unloading holdings of
Hong Kong stocks following a spate of new share issues by
leading local firms, analysts said.
    The Hang Seng index fell 61.07 to 2,713.81 yesterday on
speculation that Hutchison Whampoa Ltd planned a bonus issue of
new "B" shares.
    After yesterday's market close Hutchison and its parent
Cheung Kong (Holdings) Ltd both announced one-for-two bonus
issues of "B" shares. The news sent the index down 63.51 points
to 2,650.30 in today's morning session.
    The Cheung Kong companies' issues  followed Jardine
Matheson Holdings Ltd's announcement on Friday of a
four-for-one bonus issue of new "B" shares.
    There is also market speculation that Evergo Industrial
Enterprise Ltd will make a similar move, following a request
for suspension in share trading by the firm today.
    Analysts said these new issues will have an adverse impact
on trading.
    James Miller-Day, director of County Securities Asia Ltd,
said: "I don't like the concept of "B" shares because it will
create inequality among equities."
    He said the issue of "B" shares could create a conflict of
interest with holders of other classes of shares, noting most "B"
shares are issued at a par value equivalent to one-tenth of the
"A" shares, but enjoy similar voting rights.
    Other analysts said the new issues also renewed concern
over local corporate attitudes towards political changes in
Hong Kong after the British colony reverts to China in 1997.
    Controlling shareholders can maintain control of local
firms by issuing cheaper shares, with much of the new stock
being distributed to themselves, analysts said.
    Those shareholders can reduce their investment exposure
here by selling some of their "A" shares and using the funds for
new investment, possibly overseas.
    An analyst at a major brokerage house said Li Ka-shing,
chairman of both Cheung Kong and Hutchison, might be planning
to fund future expansion by switching "A" shares for "B" shares.
    Other analysts noted that the Cheung Kong group has already
taken a major stake in Husky Oil Ltd of Canada and a minority
share in Pearson Plc of Britain.
    Hutchison has begun a major project to expand berthing
facilities at its Hong Kong International Terminal Ltd and
Cheung Kong will bid for a big land reclamation development at
Hong Kong harbour.
    The analysts said timing of the new issues was wrong
because the local market had already been hit by declines on
Wall Street and London since the beginning of the week.
    "(The issues) came at a time when world stock markets are
reeling from tensions between the U.S. And Japan over their
trade relations," said Barry Yates, director of Hoare Govett
Asia Ltd.    Jardine Matheson's shares enjoyed a brief rally after the
announcement of the new issue, though they have lost 2.50 H.K.
Dlrs since last Friday to stand at 22.30 dlrs today.
    Cheung Kong was down two dlrs from yesterday's close at
41.25 dlrs and Hutchison fell 3.25 dlrs to 49.75 dlrs.
 REUTER
