Index giant HSBC tumbles as players consider heavy exposure to US
A roller-coaster session on Wall Street and a deepening crisis in Central Asia saw Hong Kong investors once again running for cover from equities.
The Hang Seng Index dropped 240.17 points, or 2.51 per cent, to close at 9,317.98 on a turnover of HK$7.06 billion.
'I'd expect to see some buying in this market but most investors are on the sidelines and don't know what to do,' SBI e2-Capital Securities institutional sales head Steven So said.
Analysts said all eyes remained fixed on Afghanistan and the surrounding area as the world braced for the United States' response to last week's attacks in New York and Washington.
'This is more political and military than economic,' Mr So said.
Despite recent, hopeful comparisons to the brief and conclusive Gulf War, analysts said global markets were fearful of a protracted and vicious land war in Afghanistan.
Even the relatively bullish Joseph Tang, the research head at Sun Hung Kai Financial Group, said drawn-out conflict would send markets reeling again.
'After [last Wednesday's] sell-down, it may look very attractive but we must not forget the potential risk of war,' he said. 'If there is war, we could well see another sell-down.'
Adding to investor gloom was Wednesday's 'Beige Book' in the US, an anecdotal overview of the country's economy from the Federal Reserve.
The latest release suggested the US economy continued to deteriorate, even before the attacks, and also showed scant evidence that the White House's US$38 billion tax rebate was persuading US consumers to shop.
Also weighing on minds were a plethora of warnings from such firms as Eastman Kodak and Boeing Corp as US corporates began to feel the pinch from last week's attacks.
'We saw quite a few earnings warnings [on Wednesday] and expect to see them for the remainder of the year until we see a pick-up in the economy,' Mr So said.
Most Hong Kong blue chips plunged yesterday with HSBC leading the pack. The banking giant slumped 4.18 per cent to HK$74.50 and accounted for 110 points of the index's fall.
'The US accounts for roughly 25 per cent of [HSBC] earnings and if there is a major slowdown, there is bound to be some impact,' Mr Tang said.
HSBC's resilience in the face of more intense selling in recent months had made it a prime target for short sellers.
In London, JP Morgan downgraded the bank's London-listed share on the basis of its global exposure.
Phillip Securities research head Louis Wong Wai-kit said there was some buying in the market but these purchases had been mostly opportunistic, short-term trade.
Mr Wong said the genuine buyers would be hidden from view until the US economic picture cleared.
Next week sees the release of the closely watched consumer confidence figures from the Conference Board and the University of Michigan.
Analysts waited to see if the outlook was worsening for US consumer spending following the most recent confidence figures which showed sharp falls.
'People will see if things are getting uglier,' Mr Wong said.
Close: 9,317.98 (- 240.17)
Turnover: $7.06 bln
Volume: 3.93 bln shares
Day's high: 9,415.1
Day's low: 9,249.16
September futures: 9,250 (- 295)
October futures: 9,270 (- 270)