Recession fears drive declines
Hong Kong stocks continued their retreat yesterday amid growing fears of a double-dip recession, and local investors were left nursing losses of millions of dollars a day after a hacking attack forced the suspension of seven firms on Wednesday.
The benchmark Hang Seng index declined 0.95 per cent, or 188.53 points, to close at 19,595.14, although turnover was only HK$78 billion, well below the HK$100 billion levels seen in recent sessions.
Other markets in the region also lost ground, although South Korea rose 0.62 per cent. In Tokyo, the Nikkei 225 fell 0.63 per cent, Taiwan's Taiex Index dropped 0.22 per cent and Australia's S&P/ASX 200 index was mostly even, edging down just 0.01 per cent.
Hong Kong traders said sentiment had improved yesterday and the battered banking sector had showed some signs of recovery. China Construction Bank rose 1.71 per cent to HK$5.35, and Bank of China surged 1.33 per cent to close at HK$3.05.
Index heavyweight HSBC Holdings, however, fell 2.9 per cent to close at HK$67. It had been up 3.92 per cent on Wednesday before trading was halted. HSBC was among the seven listed firms that were suspended from trading on Wednesday due to a technical problem,
The Hong Kong Stock Exchange said on Wednesday that its regulatory disclosure website was hit by hackers, forcing the suspension of trading in shares of seven firms with a combined market value of HK$1.5 trillion.
Traders betting on a rebound in HSBC shares, which have fallen 13 per cent over the last week, ended up in the red because they were unable to sell in time. The suspension meant that investors were unable to take profits or avoid losses because they could not trade.
A derivative warrant gives the holder the right to buy or sell securities - usually shares - at a specific price within a certain time frame, allowing investors to speculate on share prices. In the instance of a call warrant, buyers only benefit if there is a gain on the underlying stock or index, which could occur over a few hours or a few days.
A total of 491 derivative warrants worth HK$220 million were affected by the trading halt. Simon Yung, a director and head of warrant sales at Standard Chartered Bank, estimated that investors' losses from warrants on the seven suspended stocks were about HK$30 million. 'We have seen significant liquidity coming into the derivative warrants market, in particular, call options, speculating on an improved market performance,' said Yung.
Hong Kong stocks were hit after a sudden surge in volatility. Investors were spooked by Standard and Poor's credit downgrade of the United States and the ongoing euro zone debt crisis.
'Given the fall [in the US and Europe], Asian markets are looking quite resilient,' said Peter Elston, a strategist at Aberdeen Asset Management.
'Initially, all markets got hit by a contraction of risk appetite and at one point there will be a shift of focus towards the fundamentals of Asian markets,' Elston said.
Many analysts believe that Asian countries' economic fundamentals remain sound, because the region is not plagued by the budget deficit problems undermining the US and Europe.
The amount of stimulus spending, in US dollars, by nine Asian economies including China and Japan, following the 2008 financial crisis