HK shares tumble 4.25pc as investors lose hope in rate cuts
Hong Kong stocks resumed their slump yesterday on concern an expected interest-rate cut from the United States Federal Reserve this week may not be enough to jump-start the struggling global economy.
The Hang Seng Index led another volatile session across Asia, dropping 1,068.76 points or 4.25 per cent to 24,053.61. Losses could have been even worse if not for a late rally that salvaged more than 450 points.
Yesterday's slide means the index has now lost almost 25 per cent of its value since rising to a record 31,638.22 points on October 30.
With the global economy teetering on the edge of a recession, the index has slumped 13.52 per cent this year and is headed for its worst month since March 2001.
The Fed last week slashed interest rates by 75 basis points, the most in 17 years, giving a short-term boost to global equities but also leaving investors hungry for more.
'There is a very strong market expectation that they are going to continue cutting rates,' said Tim Leung, a fund manager at IG Investment. 'If they do not cut as aggressively, the market will be disappointed.' The Federal Reserve could cut its benchmark rate by 50 basis points, according to Mr Leung and other observers.
After gaining on last week's unexpected rate reductions, Hong Kong's major property developers came crashing down to earth yesterday amid speculation that cuts this week may not match expectations.
China Overseas Land & Investment, which joined the index last month, fell 8.33 per cent to HK$13.20 after falling as much as 9.44 per cent. Hang Lung Properties was not far behind, sliding 6.41 per cent to HK$29.95 after being down as much as 9.38 per cent.
While property stocks were prime targets in the sell-off, no quarter of the blue-chip index was safe as all but two of its 43 constituents were dragged down.
'There could be further downside,' said Jing Ulrich, JP Morgan chairman for China equities. 'Investors have become a bit more risk averse given the uncertainties in the global economy.'
The rally in the final hour of trading managed to put a lid on mounting losses. But investors are braced for more losses in the blue-chip index, which closed yesterday 23.97 per cent off its record high almost three months ago.
'The market is very volatile,' said Felix Man Kam-fai, a director of Hantec Futures. 'There's good news and then one minute it changes to bad, so the market is very difficult to trade.'
Regional markets also slumped yesterday, with Japan sliding 3.97 per cent, South Korea 3.85 per cent, Taiwan 3.28 per cent and Indonesia 1.47 per cent.
Shanghai dropped 7.19 per cent, extending its decline since Monday last week to 14.69 per cent.
Investors dumped shares in Bank of East Asia after the Financial Times reported that chairman David Li Kwok-po had reached an agreement to pay more than US$8 million to US securities regulators over allegations of insider trading. Hong Kong's third-largest bank by assets dropped 5.93 per cent to close at HK$44.40.
Market watch
This week's potential market moving events
Today
US December durable goods figures
Countryside, biggest US mortgage lender's fourth-quarter results
British, German, French and Italian leaders meet to discuss market turbulence
Tomorrow
US fourth-quarter GDP figures
Thursday
US Fed to decide on interest-rate cut
Hong Kong stock market futures settlement day
Friday
US January unemployment figures
