The Hong Kong share market tumbled 2.52 per cent to a shaky close below the 10,000-point level yesterday as interbank rates jagged higher and regional markets weakened.
The Hang Seng Index fell 254.86 points to finish at 9,841.51, its second close below 10,000 points in the past week.
BNP Prime Peregrine Securities institutional sales director Allen Chang said: 'There are rumours that hedge funds are gearing up for another attack on the Hong Kong dollar, so Hibor [Hong Kong interbank offered rate] jacked up to pre-empt that move, and that affected Hong Kong's shares very badly.' Another trader said: 'People are shorting and shorting. I am stumped.' Three-month Hibor rose 50 basis points to a two-month high of 7.75 per cent, while one-month money closed at 7.25 per cent, more than one percentage point up on the day.
Indosuez WI Carr Securities sales and trading director Tom Leventhorpe said: 'We have seen some quite extensive selling across the market.' Trading remained thin at $4.97 billion but was up on Monday's $3.61 billion.
Brokers said index futures trading dominated cash-market moves. In the morning the May contract hung stoically above the 10,000-point level before falling off sharply in the afternoon.
Mr Leventhorpe said that once the futures broke through 10,000 points, stop-losses took the market lower.