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HONG KONG, Oct 31 (Reuters) - Hong Kong stocks fell in early trade on Friday, as investors scurried to take profits on good news after the United States reported surprisingly strong third-quarter economic growth.
China's number-two mobile carrier, China Unicom Ltd , was the biggest blue chip loser, falling 3.9 percent to HK$7.40 after investment bank Merrill Lynch downgraded the stock to "sell" from "neutral", citing high valuation concerns.
The company reported forecast-beating third-quarter results on Thursday as its CDMA network recorded its first profit, but investors fear that growth was cannibalising from the group's older GSM network.
The stock also drew profit taking after ringing up 23 percent over the past month.
The benchmark Hang Seng Index was down 0.41 percent, or 49.37 points, at 12,093.98 after 39 minutes' trade.
"The index has risen too far and share prices have already factored in most of the good news. Most investors chose to lock in profits now," said Linus Yip, a strategist at First Shanghai Securities Ltd.
The United States reported surprisingly strong 7.2 percent gross domestic product growth between July and September, which spurred a fleeting rally in the market but lost steam towards the end of the day.
Blue chips in Hong Kong fell slightly as mild profit-taking pressure emerged.
China Mobile (Hong Kong) Ltd , the index's second-largest heavyweight, fell 1.78 percent to HK$22.05 after U.S. telecommunications and technology stocks had a lacklustre session.
PCCW Ltd , the territory's dominant fixed-line operator, dropped 1.77 percent to HK$5.55.
But consumer goods exporter Li & Fung Ltd , which ships the bulk of its products to the United States, bucked the trend. The blue chip climbed 1.94 percent to HK$13.15 in early trade, rebounding slightly after tumbling over seven percent on Thursday after a major shareholder sold its remaining shares.
China-backed conglomerate Shanghai Industrial Holdings Ltd also had a good session, running up 1.71 percent to HK$14.85.
The company said after Thursday's close that it expected net profit for 2003 to exceed that of 2002 due to its investment in a chip foundry, Semiconductor Manufacturing International Corp (SMIC).
Fashion retailer Ports Design Ltd enjoyed a strong market debut. The stock was trading at HK$13.40, up 27.6 percent from the issue price of HK$10.50 each.
Ports Design expects net proceeds of about HK$244 million from the offering. Its IPO came hot on the heels of mini-car and helicopter maker AviChina Industry & Technology Co Ltd , which had its market debut on Thursday.
AviChina shares climbed 4.76 percent to HK$1.54.
Market volume was firm at HK$4.1 billion (US$526 million) after 38 minutes' trade.
(US$1=HK$7.8)