Fears that prime lending rates might rise tomorrow, coupled with another dismal performance on the Tokyo Stock Exchange, wiped nearly 4 per cent off the Hang Seng Index yesterday, brokers said. The Asian declines triggered a wave of selling in equity markets across Europe ahead of the regular meeting of the US Federal Reserve's Open Market Committee, which will consider US monetary policy. The Fed's decision was expected early this morning. Analysts were forecasting no policy change, in part because of the precarious state of world financial markets. Yesterday, the Hang Seng Index slumped 396.22 points, or 3.96 per cent, to 9,607.91 points, its sixth decline in seven sessions. The 33-member indicator has fallen nearly 15 per cent since November 3, and brokers said it now showed signs of settling beneath the key 10,000-point mark. Asia Financial Securities research manager Kinson Au Kin-kee said: '[Hong Kong] investors were concerned that the prime rates would be increased, maybe by three quarters of 1 per cent or by 1 per cent.' Traders said sustained high interbank rates might strengthen the banks' case for another prime-rate rise, although it appeared the Government was pushing hard for such a rise to be avoided. The prime rate has been 9.5 per cent since October 23, when it was raised from 8.75 per cent during the Hong Kong Monetary Authority's (HKMA) defence of the currency peg to the US dollar. Nikko Research Centre chief analyst Steven Thompson said: 'The fact is that Hibor is higher than the prime. Banks that rely on Hibor aren't making any money at these levels.' Money market traders said one to three-month interbank rates ended level at 15 per cent, despite early intervention yesterday by the HKMA, The overnight rate remained soft at 5 per cent, while the one-week rate stood at 12 per cent. Mr Au said: 'Maybe the index will settle around 9,000 points if rates are raised.' Brokers said the dive in Tokyo's Nikkei-255 Index also dealt a blow to equity investor confidence. 'The comfort zone was over 16,000 [points],' one broker said. 'Anything below that sets alarm bells ringing across the region.' Yesterday, the Japanese lead indicator dropped 433.06 points to 15,434.17 on fears the country's economic recovery was faltering and the government was short of convincing ideas to breathe new life into it. The Japanese banking sector has led the market to two-year lows, pressured by jitters about a rise in bankruptcies at home and increases in bad loans from clients across Southeast Asia. 'The 15,000 level on the Nikkei is pretty frightening. It might be Japan's turn to lead the world for a while,' Paribas Asia Equity head of Hong Kong research Robin Hammond said. Brokers said investors were also on alert about the apparent deterioration of the South Korean economy. Bob Semple, strategist at NatWest Markets in London, said: 'The general mood in the markets is very nervous and that is making [it] very soggy.' In New York, the Dow Jones Industrial Average fell sharply on opening before regaining some lost ground to be 46.66 points lower at 7,512.07 at 11am.