The Hang Seng Index plunged below 10,000 points yesterday for the first time since October as the crisis in confidence in corporate America spread to the banking sector and sent global markets into a tailspin.
The fresh financial turmoil was likely to make it tough for Bank of China (BoC) Hong Kong to stay above its $8.50 flotation price when the $22.1 billion initial public offering starts trading today, traders said.
The Hang Seng Index nosedived 341.90 points, or 3.31 per cent, to 9,971.99 points as a congressional investigation into Wall Street giants JP Morgan and Citigroup stoked fears that US accounting scandals might claim a banking-sector casualty.
'There must be a risk. It's a question of the size of it,' said Michael Hughes, chief investment officer for Baring Asset Management. 'The end [of a corporate crisis] is usually associated with some sort of financial casualty and we haven't seen the blood on the street yet.'
European markets mostly followed on from where embattled Asia left off. London's FTSE-100 was down 2.1 per cent, falling to a new six-year low of 3,777.1, while the French CAC 40 index was down 1.5 per cent. However, Germany's DAX 30 staged a huge turnaround to be up 1.2 per cent in late trade, erasing an earlier seven per cent loss.
The recent spate of stock market losses caused British Prime Minister Tony Blair to take the unusual step of calling for financial calm. 'The prime minister believes in the fundamental strength of the British economy,' his spokesman said. 'This country is better placed than many other countries to survive the ups and downs of the stock market.'
Earlier in the day, Japan's Nikkei Index was down 2.62 per cent, South Korea's benchmark index lost 2.97 per cent, Taiwan was down 2.32 per cent and Thailand's SET Index dived 3.48 per cent.
