Mainland recovery stems HSI plunge
Record turnover as panicked investors send stock market tumbling
Hong Kong shares plunged yesterday as investors panicked after sharp falls in the United States and European markets on Tuesday.
The tumble was mirrored by other Asia Pacific stock markets, except the mainland's, which recovered from Tuesday's record fall that helped spark the global sell-off.
In a day of record turnover on the Hong Kong exchange, the benchmark Hang Seng Index plunged as much as 765.99 points, or 3.8 per cent, in early trading before clawing back some of the losses to close down 2.5 per cent at 19,651.51, lifted by the mainland rebound. The H-share China Enterprise Index slid 3.2 per cent to 9,283.67.
About HK$80.86 billion worth of shares changed hands yesterday, overtaking the previous record of HK$79 billion set in 1998, when the government stepped in to shore up the market in the midst of the Asian financial crisis. Yesterday's plunge wiped HK$374 billion off the market's HK$13 trillion capitalisation, according to figures from the Hong Kong stock exchange.
'Plunging more than 700 points was totally irrational. We saw investors aggressively liquidate their holdings regardless of price in the morning session,' said Castor Pang, a strategist with Sun Hung Kai Financial.
In other markets across the region, Japan's Nikkei 225 fell 2.9 per cent, Korea's Kospi fell 2.6 per cent, Australia's benchmark dropped 2.7 per cent and Singapore's dived 3.7 per cent.
The Shanghai Composite Index rebounded, finishing 3.9 per cent higher at 2,881.07 from the intraday low of 2,732.88, as state media reported the government did not plan to impose a capital gains tax. Speculation about such a plan had contributed to an 8.8 per cent drop in the benchmark the day before, the biggest in a decade.
The broad dive of Asian stock markets was in reaction to the 3.3 per cent drop in US stocks, and a more than 2 per cent decline in major European markets on Tuesday, triggered by worries of an economic slowdown in the US and China's stock market tumble.
AuYeung Tat, a fund manager at Apex Capital, said the broad dive reflected the powerful influence of globalisation, as well as the mainland's increasing influence across the world.
Investment bank ICEA said in a daily note: 'In our view, the market tumble is the beginning of a major correction this year. We have expected the market to bottom at around 18,600 points this year.'
