The collapse of Indonesia's financial markets and fears about the future of the dollar peg helped push Hong Kong share prices sharply lower yesterday. The Hang Seng Index fell for the sixth day in a row, slumping 284.08 points, or 2.97 per cent, to 9,254.53. A late rally lifted it off the day's low of 8,928.86. So far this year, the index has dropped almost 14 per cent amid the Asian financial crisis. And the turmoil in regional equity markets continued yesterday with severe losses seen in Singapore and Manila. Currencies also remained weak. While SAR stocks slid, local interbank lending rates jumped, with the market falling below the 9,000-point level. Higher rates for lending between banks suggest that pressure may be building against the 14-year tie between the local dollar and its US counterpart. Property and banking counters, the sectors most sensitive to higher borrowing costs, bore the brunt of the sell-down. Brokers said there was concern that banks might raise the prime lending rate - currently 9.5 per cent - after their regular weekly meeting today. 'On the basis of today's interbank rates, bankers have no choice but to raise the prime rate. But if they do, there will be more carnage in the stock market,' one said. Mainland-related counters were savaged for a second day amid fears China might be forced to devalue the yuan to boost the competitiveness of its exports. The Hang Seng China Enterprises Index dropped 8.43 per cent to 539.33 points, while the official red-chip measure dived 8.67 per cent to 1,315.17. American investors worried about the deepening crisis in Indonesia and Thailand saw the Dow Jones Industrial Average fall 89.43, or one per cent, to 7,813.84 in early trading yesterday. 'There's no sign of a bounce back in US stocks', said one New York trader. 'Asia markets are down. Nothing is pointing up.'
