Asia: Hong Kong Hammered

Not all market participants are convinced of the death of the deal with China Mobile, however. "Bottom line: Apple needs Mobile more than Mobile needs Apple. There are already plenty of iPhone knockoffs in China that are less expensive, and arguably as good," wrote Bryan Watson, a trader for Daiwa Securities in Hong Kong, in a note to dealers.

Most other trading was dominated by pronounced selling in blue chip stocks with large weightings in the Hang Seng. HSBC Holdings(HBC Quote) fell 2.1% to HK$120.80, and PetroChina(PTR Quote) dropped 4.2% to HK$12.70. Hutchison(HUWHY Quote) gave back 3% to HK$82.90.

Dealers said they were also unloading positions in FTSE/Xinhua A50, an ETF similar to the U.S.-listed iShares FTSE Xinhua(FXI Quote), Cheung Kong(CHEUY Quote), and Hong Kong Exchanges(HKXCF Quote). FTSE/Xinhua A50 lost 1.3% to HK$25.70, while Cheung Kong fell 0.7% to HK$135.70. Hong Kong Exchanges dropped 3.6% to HK$184.90.

Mainland banking stocks were also sold after Joseph Yam, chief executive of the Hong Kong Monetary Authority, announced that a new qualified domestic retail investor program, which allows mainland individuals to buy Hong Kong shares, would be implemented earlier than expected.

The last of such announcements, in July 2007, sent the index soaring over 50%, but now investors are afraid the introduction of such a program will harm the fragile share prices of mainland companies.

In Shanghai, China Merchants Bank(CIHHF Quote) tumbled 3% to 41.81 yuan, and Industrial & Commercial Bank of China(IDCBF Quote) lost 2% to 8.12 yuan. Bank of Communications(BKFCF Quote) and Bank of China(BACHF Quote) both fell 1.9%, to 15.66 yuan and 6.77 yuan, respectively.

Olympic "theme" stocks were mixed. Beijing Media(BJGMF Quote) dropped 5.6% to HK$5.20, while Air China(AIRYY Quote) gained 0.4% to 29.30 yuan, and realtor Beijing North Star(BEIJF Quote) lost 2.6% to 16.52 yuan.