US recession fears shake markets
HSI dives to 5-month low as Bush's economic rescue plan fails to reassure investors
Hong Kong stocks plunged to the lowest level in almost five months yesterday as US President George W. Bush's rescue plan for the US economy failed to convince nervous investors the world will avoid a recession.
On another horror day for global markets, the Hang Seng Index slipped through the key 24,000 support level, fell 1,383.01 points, or 5.49 per cent, to 23,818.86. The H-share index of mainland companies plummeted 7.07 per cent to 13,531.45, its biggest one-day drop in more than three years on concern slowing growth in the US will hurt company earnings.
'The market will remain very volatile, with investors still focused on the subprime crisis,' said Ben Kwong Man-bun, chief operating officer at KGI Securities.
'Even though the US has introduced some stimulative measures, investors are not confident.'
Hong Kong, the mainland and India led the sell-off in the Asia-Pacific region as investors gave the cold shoulder to President Bush's plan to jump start the flagging US economy by allocating nearly US$150 billion to tax relief efforts.
Heavy market losses also hit Europe, with the UK's FTSE 100 closing down 5.48 per cent, France's CAC 40 ending the day down 6.83 per cent and Germany's Dax down 7.16 per cent.
Earlier, Shanghai dropped 5.14 per cent, India slumped 7.41 per cent, Japan slid 3.86 per cent and Korea fell 2.95 per cent.
Wall Street was closed yesterday for a public holiday.
'All eyes are on the US economy,' said Mao Nan, an analyst at Orient Securities. Troubles in the world's biggest economy would 'play a role in the local equity market'.
All 43 members of the Hang Seng Index dropped, with banks, exporters and insurers among the hardest hit. The benchmark index has slumped 14.36 per cent this year and more than 24 per cent from its record 31,638.22 reached on October 30.
The Bank of China, which has the largest subprime-related losses of any Asian lender, slipped 6.39 per cent to HK$3.37 after BNP Paribas said the lender had not made enough provisions for its securities related to poor quality US mortgages.
China Life slumped 9.50 per cent to HK$32.85, while Ping An Insurance dropped 6.33 per cent to HK$68.05.
The Hong Kong market nose-dived more than 600 points in afternoon trading, with the late sell-off fuelled by short-term investors.
Esprit Holdings, a global retailer, slipped 5.69 per cent to HK$87.80, while Li & Fung, a supplier to Wal-Mart stores, fell 2.92 per cent to HK$24.95.
'People who had a short-term investment now want to exit the market because of the large degree of uncertainty,' said Tim Leung, a fund manager at IG Investment.
US stocks on Friday posted their worst week since July 2002 as investors also failed to be sold on the US recovery plan.
The Hong Kong market might not be able to recoup losses until the US showed signs of pulling out of its slowdown, Mr Kwong said.
Additional reporting by Daniel Ren in Shanghai
