HONG Kong stocks retreated for a third day yesterday, led by China Mobile Ltd and PetroChina Co, after the Chinese government said it will reorganize the telecommunications industry to help smaller operators and crude oil gained.

China Mobile, the world's largest phone company by users, slumped the most in more than six years.

According to Bloomberg News, the stock's decline accounted for more than half of the benchmark Hang Seng Index's drop. PetroChina, the nation's second-biggest refiner, fell to a five-week low as crude rose for a second day. Yue Yuen Industrial Ltd, the biggest maker of sports shoes, dropped on concern costs will rise at the same time as consumer spending falls in the United States.

"China Mobile is suffering from a hangover after the announcement" of the industry shake-up, Francis Lun, general manager at Fulbright Securities Ltd in Hong Kong, said. "Global equity markets will suffer because of the rising price of oil."

The Hang Seng index lost 586.76 to 24,127.31 at the close, extending a two-day, 2.9 percent retreat. About three stocks declined for each that advanced. The gauge closed at its lowest since April 16. The Hang Seng China Enterprises Index, which tracks the H shares of Chinese companies, dropped 3 percent to 13,221.28.