Hong Kong stocks dipped 84.6 points, or 0.66 percent, to close at 12,776.89 on Tuesday, on the plunge of property companies.

The property sub-index of the benchmark Hang Seng Index dived 899.53 points, or 5.34 percent, after a big increase in negative-equity mortgages raised concerns that the already weak property market will further decrease.

The downturn of the property plays led the Hang Seng index to surrender its early gains and close lower.

Turnover shrank to 35.26 billion HK dollars (4.55 billion U.S. dollars) from 35.69 billion HK dollars on Monday.

Traders said they expected the index to fluctuate between 12,000 and 13,600 most of February on caution ahead of earnings season.

"There is no rush to jump into the market, as there are too many uncertainties over the U.S. economic outlook," said Jackson Wong, investment manager at Tanrich Securities.

Property companies underperformed the broader market after the Hong Kong Monetary Authority said the number of residential mortgages in negative equity rose threefold to 10,949 at the end of December from 2,568 at the end of September.

The Land Registry also said property transactions slumped 66.1 percent in January from a year earlier to 5,759, and the total value of property transactions in the month was 18.7 billion HK dollars, down 72.4 percent from January 2008.

Citigroup said the sharp increase in Hong Kong's negative- equity mortgages in the fourth quarter suggested the city's property market deteriorated faster than originally expected.

Sun Hung Kai fell 4.9 percent to 64.65 HK dollars and Cheung Kong ended down 6.1 percent at 66.20 HK dollars. Hang Lung Properties was the biggest blue-chip decliner, tumbling 7.2 percent to 16.32 HK dollars.

But telecommunications stock PCCW bucked the downtrend to rise sharply on speculative demand ahead of a shareholder vote Wednesday on a plan by its major shareholders to take it private.

PCCW surged 7.8 percent to 4.17 HK dollars when it resumed trading Tuesday afternoon.

The financial sector is among the few sectors that ended on the positive territory on Tuesday. Bank of East Asia rose 3.3 percent to 15.6 HK dollars, following news that conglomerate Guoco Group raised its stake in the bank to 5.02 percent from 4.97 percent for 12.2 million HK dollars late last month. (One U.S. dollar = 7.7465 Hong Kong dollars)

(Xinhua News Agency February 3, 2009)