Hang Seng Index drops 12.7pc and regional rout continues amid a 'dash for cash' Panic selling again gripped equity markets yesterday as skittish investors ignored government reassurances and instead scrambled to dump stocks fearing the global financial crisis is far from over. Selling pressure gained steam as the yen hovered close to a 13-year high against the US dollar, despite a statement by the Group of Seven nations expressing concern about the advance. Investors also shrugged off news that the International Monetary Fund had agreed to bail out Hungary and Ukraine. The Hang Seng Index dropped 1,602.54 points, or 12.70 per cent, to 11,015.84, after earlier breaching the psychologically important 11,000 barrier. It fell as much as 15.39 per cent during the day for its biggest intraday drop since the 1989 crash following the Tiananmen Square crackdown. The Hang Seng's tumble was its second-largest points slide on record and wiped out nearly HK$1 trillion in market capitalisation. Liquidation selling was evident throughout the rest of the region. Japan's Nikkei 225 Average sank to a 26-year low after falling 6.36 per cent. Elsewhere, the Philippines fell by 12.27 per cent, Taiwan dropped 4.65 per cent and Indonesia 6.30 per cent. 'What is happening at the moment is just a dash for cash,' said Khiem Do, the head of Asian multi-asset investment at Baring Asset Management. 'It's possible that some global investors have decided that the world could fall into a serial recession and if that were to be the case then they would prefer not to hold emerging market equities for the next few months.' Britain's FTSE 100 closed down 30.77 points at 3,852.59, while the Dow Jones Industrial Average was up 118.60, or 1.42 per cent, at 8,497.55 in early afternoon trade. The Shanghai Composite Index broke through another significant threshold, tumbling below 1,800, which was widely considered a rock-bottom support level for the A-share market. The index fell 116.27 points, or 6.32 per cent, to 1,723.35, its lowest level since September 26, 2006. 'The A-share market wasn't able to resist the downward trend globally as investors are squeamish about the economic outlook,' said Liu Jun, an analyst at Essence Securities. 'Though the prices of some stocks look attractive, the market is set to fall further.' The Shanghai index has fallen 67.25 per cent so far this year, and analysts predicted that it could drop to 1,500 in coming weeks. Joseph Yam Chi-kwong, chief executive of the Hong Kong Monetary Authority, acknowledged that the global economic slowdown was beginning to take a toll on the city's companies. Financial Secretary John Tsang Chun-wah sought to reassure nervous investors yesterday, saying the government had plans in place to back the stock market if needed. But that may not be enough to bring investors back to the market when selling pressure and volatility have all but dried up buying interest. 'The market is worried that several [stimulus] measures so far have not really helped to stabilise it and cannot restore investor confidence,' said Teresa Chow, a fund manager at RBC Investment Management. 'There's no buying interest.' The devastation in the local market and across the region reminded seasoned investors of previous equity collapses, including the Asian financial crisis and the crash of 1987. Howard Gorges, a vice-chairman of brokerage South China Financial Holdings, said: 'But this time around, people are, in a way, puzzled and don't understand what on Earth is going on. There is a sort of feeling of bewilderment.'