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Index crashes below 11,000 on overseas sales


THE Hang Seng Index crashed through the 11,000 mark yesterday as strong foreign selling pressure knocked more than 500 points off the index.

Hardest hit were HSBC and property counters as investors continued to react to the US interest rate rise which battered the market last week.

This latest correction has seen 1,169 points slashed off the index since Friday, February 4, when the US Federal Reserve raised its interest rates.

Brokers say there is no sign of a turnaround in the near future. The Jardine Fleming index, which tracks local stocks in London trading, was down a further 197 points at 9.10 pm Hong Kong time.

The market dropped 515.22 or 4.5 per cent from its previous close of 11,504.03 points to finish at 10,988.81, its lowest close since January 17.

This is the sixth largest point fall in the index in a single day, coming hot on the heels of last Monday's 743.3-point fall which was the third largest one-day drop. The biggest one-day point fall occurred on the October 26, 1987.

Turnover was a light $6.29 billion as much of the market movement was led by the futures market.

Describing market sentiment as very nervous, Nomura International vice-president Gary Wong said: ''There was some retail panic in the market and there are still excess stocks to be sold. So we can expect further selling tomorrow.'' Analysts said the shock waves from the US interest rate rise were still pounding the market, and all eyes would again be on Wall Street to see in which direction that market would go.

The local market was also flush with speculation that Hong Kong interest rates would be raised this Friday. Brokers said if that happened the market could see further falls next week with property stocks being most affected.

The market had expected a strong sell-off in the morning yesterday on the back of London selling over the new year break, and it got one.

The index opened around 11,350 and quickly slid down to 11,074.98 at 10.30 am.

It then found support and briefly rallied to around 11,150 at 10.45 am before running out of steam and dropping below the 11,100 mark.

The index drifted around 11,100 as local investors waited to see which way the market would move.

They got their answer when foreign investors dumped stock in the half-hour before lunch, stripping a further 100 points off the index.

The morning closed at 11,029.76 points with investors expecting more selling in the afternoon.

The afternoon session opened with a backlog of overseas sell orders, mainly from American institutions. Just after 3 pm the index hit its low mark of 10,898.48 for the day.

A slight turnaround towards the close was not enough to save the index which closed at 10,988.81.

Futures traded at a discount to the cash market for most of the day, and closed at a 188.81-point discount to the cash market at 10,800, with an open interest of 31,308.

HSBC was again one of the biggest losers of the day, dropping $7 or 5.65 per cent to close at $117 on a relatively modest turnover of $901.09 million.

There was heavy selling of HSBC stock in London over Chinese New Year which flowed on into yesterday's trading.

One broker said British institutions which had done so well out of the stock over the past few weeks were now cashing in their profits and investing in British banks to take advantage of the recovering economy there.

He said the spate of warrant issues on HSBC over the past few weeks had driven the price up quickly, so any decline in the price would be magnified.

HSBC has fallen 12 per cent from its record high of $131 on February 4 this year.