AN overnight fall on Wall Street and continuing rumours about the death of China's paramount lead Deng Xiaoping yesterday caused the market to fall by nearly two per cent. The Hang Seng Index finished the day 143 points down, or 1.94 per cent, to close at 7,278. Turnover was $2.6 billion, about $140 million up on Thursday's trading, but still thin. Brokers said trading generally lacked direction with the market largely moving sideways after the early morning fall. There was a late afternoon surge as local buyers also took advantage of low prices to rebuild portfolios and companies bought back stock. Brokers said a lot of their sellers were also locals who had decided to reduce positions having given up on their punt on a Lunar New Year rally. Most believe the market will continue to suffer from the jitters until their is a clear direction on both interest rates and the health of Mr Deng. Andrew Mathers, a director of Morgan Grenfell, said: 'People are adopting a position of wait and see. They need a bit more evidence that the market is good value. They want to see interest rates peak, they want to see demand for flats increase, they want to see market stability.' James Osborn, director of Baring Securities, said much of the selling was a 'knee-jerk' reaction to persistent market rumours. Mr Osborn said: 'It's being sold off mainly by short-term traders. It seems to be trendy to be very bearish. Also, the buyers are getting patient. They are only awaiting the return of confidence.' Hong Kong stocks plunged by more than two per cent in early trading after stocks on Wall Street staged their biggest drop in six weeks on renewed fears that interest rates will rise at the end of the month. A weak US dollar was also contributing to concerns that the Federal Reserve would intervene to raise rates. By 10.15 am the market had slumped to 7,229 and continued to fall by another 19 points to its day low. By 11.45 am the market had pushed back to 7,261 points by falling back to 7,256 points by the end of the morning session. All sectors fell. Property stocks dropped by 273 points, or 2.27 per cent, while finance dropped 152 points, or 2.29 per cent. In the afternoon session the index traded in a 22-point range, dipping to 7,225 at 3 pm before struggling back to 7,278. There were losses recorded across all the Hang Seng sub-index series. Finance dropped 129.65, or 1.95 per cent, utilities 131.94 or 1.42 per cent, property was down 266 points while conglomerates finished the day down 2.08 per cent, or 114.38 points. HSBC Holdings, the banking giant, fell $1.50 to $75.25 on a turnover of $280 million. Salomon Brothers in London yesterday raised the bank to 'buy' from a 'hold'. John Leonard yesterday said the share looked cheap after having dropped by 42 per cent since their peak in February. Mr Leonard added: 'If the PRC economy overcomes the impending leadership transition and continues to surge throughout the next few years, becoming more accessible to foreign banks, HSBC is uniquely well-positioned to benefit.' Swire Pacific, the property through to financial services conglomerate, dropped $1.70 to $40.10, or around four per cent, on a turnover of $245 million. Other heavily traded stocks included Cheung Kong, which fell 75 cents to $25.95 and Hutchison Whampoa which dropped 50 cents to $26.40.
