HSI's 3.3pc two-day drop deepens gloom over global woes Hong Kong stocks have had the worst start to a year since 2001, battered by surging oil prices and fears a deteriorating United States economy will spark a global slowdown. The Hang Seng Index slipped 2.44 per cent yesterday to 26,887.28 points, bringing its two-day loss to 3.33 per cent, as oil touched US$100 a barrel and a manufacturing index in the US fell to its lowest in almost five years. The decline marks the blue-chip index's biggest back-to-back drop in the first trading days of the year since it fell 3.35 per cent in the first two trading days of 2001, when the global economy was still reeling from the bursting of the internet bubble. 'There is no good news around,' said Kenny Tang Sing-hing, an associate director at Tung Tai Securities. 'High oil prices send a bad message to investors that the global economy will drop into a recession.' The Hang Seng Index opened 510.49 points lower and slumped as much as 696.39 points before clawing back to end 23.15 points above the lowest point of the day. The H-share index slumped 3.39 per cent to 15,464.66 points. The sell-off was also seen in the region, with the Taiwan market slipping 1.67 per cent, Singapore losing 1.85 per cent and Thailand 1.23 per cent. Wall Street had the worst start to a year since 1983, with the Dow Jones Industrial Average slumping 1.67 per cent on Wednesday. The market regained 0.26 per cent at midday yesterday. European markets were mostly lower, but London was up 0.59 per cent in late trade. In Hong Kong, mainland banking stocks were among the worst hit, with Industrial and Commercial Bank of China and China Construction Bank Corp declining 6.28 per cent and 5.53 per cent, respectively. The Hang Seng Index's two-day loss has pushed it close to the 100-day moving average, a technical level widely said to be the turning point between a bullish and bearish market. 'We expect the index to encounter more challenges, due to the US credit crunch, recession threats and the tightening austerity programme in China,' ICEA analyst Ernie Hon said. 'The Hang Seng will see strong support at 26,000. Funds are waiting for punting opportunities when the market dips.' Investors who benefited from a surge in the benchmark to record levels last year are unlikely to enjoy such a good ride this year, with higher energy costs and slowing growth gathering on the horizon. US crude oil was at US$99.45 a barrel at noon yesterday after touching US$100 on Wednesday. Manufacturing in the US unexpectedly contracted last month as the housing recession spread to other parts of the economy. The Institute for Supply Management index fell to 47.7, the lowest reading since April 2003. Fifty is the dividing line between contraction and expansion. Manufacturing is near stalling in the world's biggest economy as the housing recession extends beyond building-related industries to affect credit standards and consumer and business spending plans. Clive McDonnell, the head of equity strategy at BNP Paribas, said the Hang Seng Index would linger at the 28,000-point level this year, a far cry from the record 31,638.22 reached on October 30 last year. Francis Lun Sheung-nim, a general manager at Fulbright Securities, said the US credit crunch and recession concerns would remain a major overhang for global stock markets.