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SCMP Reporter

Hong Kong stocks slid yesterday after accounting worries triggered a bruising session on Wall Street.

The Hang Seng Index dropped 112.13 points or 1.04 per cent to end at 10,609.19 following Monday's sharp losses in the Dow Jones Industrial Average and the Nasdaq Composite Index.

United States stocks have been hammered by fears that some company results are little more than accounting smoke and mirrors after revelations involving energy trader Enron Corp, which collapsed at the end of last year.

US conglomerate Tyco International plunged 16.08 per cent on Monday following a downgrade by Standard & Poor's and yet more corporate manoeuvring as the company sought to assure the marketplace it would not be providing an encore to the Enron fiasco.

Sun Hung Kai Financial Group research head Joseph Tang said the anxiety about corporate accounting integrity was in part a confidence issue.

'It's about confidence more than anything and if we don't see any further instances, once confidence resumes we'll see a better market,' Mr Tang said.

On the other hand, traders said there was little impact from the tumbling Japanese markets where the Nikkei-225 Index fell to an 18-year low.

Mr Tang said that, if anything, Hong Kong could benefit from continued weakness in Japan.

'If a weaker Nikkei and yen are perceived, it presumes some outflow from Japan and into other regional markets,' he said.

HSBC dropped 1.13 per cent to HK$86.75 while China Mobile shed 1.34 per cent to $22.05.

Bank of East Asia rose 0.32 per cent to $15.45 despite recording a 15.2 per cent drop in full-year net profit. OSK Asia research director Alex Wong was not surprised by the market's positive reaction.

'This has been discounted because banks have been under-performing for sometime now. Small banks are under pressure and no one really wants to touch them,' Mr Wong said.

Since the start of the year, Bank of East Asia has fallen 8.03 per cent.

Mr Wong said the banking sector's domestic exposure was a big part of the problem.

'Most banks are more related to the local economy,' he said.

'Even though they are trying to diversify, their loan portfolio is related to properties and so relies more on local economy, so the recovery pace will be slower than for exporters.'

Legend was a notable blue-chip gainer as the mainland personal-computer maker was rewarded for better than expected results with a 1.45 per cent increase to $3.475.

With the stock trading at 23 times this year's earnings, UBS Warburg analyst Lim Fung-ee said Legend was expensive compared with other China plays but not, by comparison with global peers such as Dell Computer Corp, which trades at 30 times.

UBS lowered its earnings forecasts for this year to 2004 by between 2 per cent and 6 per cent after Legend said it expected sectoral weakness to extend into this year.



Wall St rout stings HSI