Worries over global political and financial stability offset rate-cut efforts

A relatively strong morning for Hong Kong stocks was erased in the afternoon yesterday following reports that Afghanistan's ruling Taleban militia had launched a holy war against the United States.

Despite a denial from the Taleban, the Hang Seng Index ended down 0.12 per cent at 9,307.9 points.

'This market is so nervous that it cannot sustain any bad news,' Vickers Ballas Securities sales director Michael Liang said.

Also weighing on investor minds was a bomb threat which suspended trading at the Tokyo office of Chase Manhattan Bank. Japan's Nikkei-225 Index, which had climbed as much as 4 per cent in earlier trading, retreated but still managed to close up 1.84 per cent at 9,679.88 points.

An expected, but no less painful, sell-off on Wall Street in Monday's trading did little to calm investor resolve in the face of uncertainties about the direction of the global financial system.

The Hang Seng Index's 9,000-point level would be mostly decided by the ongoing response of Wall Street to last Tuesday's attack and the political developments in its aftermath, analysts said.

'The overall picture is still not looking good,' said Alex Wong, the research director at OSK Asia Research.