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By Tay Han Nee
HONG KONG, June 21 (Reuters) - Hong Kong stocks slipped to their lowest close since early March on Friday, with number two mainland mobile operator China Unicom sinking to a new low after the firm reported slowing growth for its newly launched but sputtering CDMA service.
The battered benchmark Hang Seng Index of 33 blue chips lost 1.51 percent, or 162.55 points, at 10,591.86. The index is down 3.3 percent this week and seven percent this year, making it one of the worst performing benchmarks in Asia.
Although the Hang Seng is oversold on its 14-day relative strength index, analysts said it may have more downside to go as U.S. markets remain weak on rising Middle East violence and a bleak corporate outlook.
"People are looking at 10,400 as the next support level but if the index breaks below this, it'll likely trigger a huge sell-off and it may test the 10,000 level again," said Ricky Tam, senior vice-president at Asia Financial Securities.
Weighing on the market was China Unicom, which ended at a record low of HK$6.20, down 5.34 percent on the day and 12 percent on the week.
The stock was hammered by news that the take-up rate for its CDMA network in May was lower than that in April, prompting investment house Goldman Sachs to slash its forecast for the company's earnings per share and to downgrade the stock to "market underperformer" from "outperformer".
Its larger and sole rival China Mobile was down 1.71 percent to HK$22.95, after the technology-heavy Nasdaq Composite Index fell to a low not reached in more than four years.
China Unicom is the worst performing blue chip this year with a drop of almost 28 percent while China Mobile is the fifth worst performer with a fall of more than 16 percent.
Also pushing the index lower was garment exporter Li & Fung , which lost 5.96 percent to HK$10.25, as some analysts said the widening trade gap in the United States might mean the world's largest economy will have to trim imports.
Other analysts said investors were just using the U.S. trade figure as an excuse to pocket profits on the stock which is still up more than 17 percent this year.
"It's just poor market sentiment in the U.S. dampening sentiment on Li & Fung, not because of any economic fundamentals, people just need an excuse to sell," said Alex Tang, research director at Core Pacific-Yamaichi.
Another export-oriented stock, micro-motor maker Johnson Electric fell 0.53 percent to HK$9.35, but is still up 14 percent this year.
Market turnover at HK$6.36 billion (US$816 million) was slightly below the 20-day moving average.
"I don't think people are putting their money in other equity markets. The obvious alternative is bonds, since many have all been hurt by falling stock markets," said Joseph Lau, fund manager at Tai Fook Asset Management.
In the broader market, cosmetic wholesaler Sa Sa International ended 4.41 percent lower at HK$0.65, off a low of HK$0.61 after the firm said it would post a loss for the year ended this March largely due to costs incurred by a new acquisition.
Last year, the firm posted a net profit of Hk$75.2 million on turnover of HK$1.44 billion.
Overall, losers swamped gainers 298 to 153, with 341 stocks unchanged.
(US$1=HK$7.8)