Hong Kong shares drop as airlines drag down market

Hong Kong shares dropped for the first time in five days Tuesday as airlines dragged down the market and investors locked in gains ahead of a holiday.

The blue chip Hang Seng Index fell 121.65 points, or 0.46 percent, to 26,430.29. Financial markets in Hong Kong will be closed Wednesday for a public holiday.

Analysts said the market will likely head for consolidation in the near term as many investors will lock in their recent gains to offload some overvalued stocks.

The benchmark index, up 32 percent since the start of the year, had hit record closes four straight days prior to Tuesday's drop.

"It's healthy for the market to take a breather, as many stocks have become heavily overbought," said Kingston Lin, director of Prudential Brokerage Ltd.

Nevertheless, analysts are generally upbeat on the long-term prospects of the city's liquidity-driven stock market, with some analysts tipping the benchmark index could reach 28,000 point before the end of the year.

"Funds will continue to pour into the market in the coming months, particularly the widely expected money coming from mainland institutional and retail investors," said Lin.

Hong Kong-listed airlines fell sharply as expectations of an industry restructuring waned after Cathay Pacific Airways and Air China's parent company aborted a plan to buy shares in China Eastern Airlines.

Cathay Pacific ended down 4.6 percent at HK$21.65, Air China closed down 11.7 percent at HK$10.46, China Eastern fell 14.7 percent at HK$7.42, and China Southern Airlines slid 4.1 percent to HK$11.82.

Bucking the downward trend, heavyweight China Mobile ended 2.5 percent higher at HK$121.10, bouncing off from an intraday record high of HK$125.0.

Turnover totaled HK$129.18 billion (US$16.63 billion; euro 11.8 billion), down from HK$140.04 billion Monday.