HK stocks follow sell-down in Asia
Hang Seng Index slips 3.07pc as investors take cue from Wall St dive amid bad news
Hong Kong stocks joined a rout across Asia yesterday, tracking a sharp drop on Wall Street on Friday after a slew of bad economic and corporate news signalled the worst is yet to come for the global economy.
The Dow Jones Industrial Average slumped 2.51 per cent on Friday after a gauge of US business activity last month fell to the lowest since December 2001. At noon yesterday, the Dow fell a further 0.26 per cent.
Investors were also hit after UBS said the subprime problem would continue to hound financial institutions and could leave US$600 billion worth of losses in its wake.
The ominous signs from Wall Street had the Hang Seng Index bracing yesterday morning, with the index dropping 3.45 per cent at the open. The index ended the session down 746.7 points or 3.07 per cent at 23,584.97. All 43 blue chips fell.
'In the very short term, if you are talking about the financial markets, it is very hard to talk about a decoupling' from the US, said Winson Fong, the managing director of SG Asset Management (Hong Kong).
'Everyone seems to look at New York to make their daily decisions, which is sad but it is the reality.'
Japan led the regional retreat yesterday, dropping 4.49 per cent, while Indonesia slipped 2.56 per cent, South Korea fell 2.33 per cent and Taiwan lost 1.78 per cent.
The Shanghai Composite Index bucked the trend, as investors bet that recent losses had been excessive and newly approved mutual funds would boost liquidity in the market. The benchmark added 2.06 per cent to 4,438.265 points to extend gains for the fourth time in five days.
'Many investors believe blue-chip stocks have hit bottom,' said GF Securities analyst Zhang Wancheng. 'But the outlook is still cloudy since a big chunk of non-tradable shares will be unlocked [this month], draining a massive amount of funds.'
Investors were also encouraged by a proposal by the China National Democratic Construction Association to the government that could ease market volatility by imposing taxes on speculators and giving incentives to long-term investors.
In Hong Kong, exporters such as Foxconn International Holdings, the world's largest contract producer of mobile telephones, and Li & Fung, a supplier to Wal-Mart Stores, were hit hard by negative news about the global economy. They fell 6.59 per cent and 3.28 per cent, respectively.
Main-board turnover withered under declining investor sentiment, tallying HK$81.12 billion and failing to reach the key HK$100 billion for the 18th straight trading day.
Trading levels might have suffered because stocks rallied last week and some investors were probably content to just cash in their holdings and quit while they had something to show for it, Mr Fong said.
The Hang Seng Index last week staged its best performance in three months, adding 4.41 per cent. 'A lot of people would like to take profits if they can make some profits out of the rebound,' Mr Fong added.
Money earmarked for the main market might have been diverted to cover orders of shares in the initial public offering of China Railway Construction Corp, said Felix Man Kam-fai, a director of Hantec Futures.
Additional reporting by Daniel Ren in Shanghai