Players display stamina as lower turnover provides evidence of calm trading

Hong Kong stocks fell 1.99 per cent yesterday on the back of Friday's falls on Wall Street and renewed concerns about rising interest rates.

The Hang Seng Index closed down 342.95 points at 16,840.98. Fears of higher interest rates were rekindled on Friday after the US Government said the economy grew at a robust 5.2 per cent in the second quarter. The Nasdaq Composite Index slumped 4.66 per cent on the news and the Dow Jones Industrial Average was off 0.7 per cent.

Higher interest rates in the US put pressure on Hong Kong banks to raise their lending rates through the SAR's linked exchange rate with the US dollar.

China Mobile pulled the Hang Seng Index down 124 points as it fell 3.11 per cent to HK$62.25. Hutchison Whampoa lost 2.67 per cent to $109 and HSBC came off 0.96 per cent to $102.50 ahead of its interim results announcement.

Brokers noted that most blue-chips fell, not just the more interest-rate sensitive stocks such as property and banks.

'The decline among the blue chips was widespread,' Fulbright Securities general manager Francis Lun said.

Some brokers, however, argued that concern about higher US rates was overdone. A large component of the growth was due to investment spending which would increase capacity and cut inflationary risks.