HK stocks drag down Asian markets

HK stocks drag down Asian markets

SINGAPORE (Reuters): A wave of nervous selling hit Hong Kong
stocks yesterday, shaving more than 6 percent off the key Hang
Seng Index, and dragging down other Asian markets, particularly
Taiwan and Malaysia.

The Hang Seng had plunged 765 points, or 6.17 percent, by the
close to a 13-month low of 11,637.77 and analysts said they did
not see anything braking the index's slide. The Hang Seng has
fallen 10.28 percent so far this week, or 23.07 percent since the
beginning of October.

But Tokyo and Korea remained untouched by the Hong Kong
upheaval and Thailand shares, which had fallen for the past four
trading sessions, ended slightly higher but in thin trade.

Hong Kong stocks went into a virtual freefall at the opening
as concerns over higher interest rates put pressure on the 14-
year-old U.S.-Hong Kong dollar peg.

"It all gets boiled down to confidence," said Pauline Gately,
regional strategist at BZW Securities.

"Right now, everything depends on (the Hong Kong Monetary
Authority's) political will to hold on to the peg. All
indications are that it is very strong and has not diminished
since the beginning of the Asian currency debacle in July,"
Gately said.

Equities fell as interest rates soared, forcing investors to
pay more for Hong Kong assets and confirming the HKMA's
willingness to sacrifice asset prices for the peg.

"The market is in a state of liquidation because of financial
pressures, and any support level is getting short shrift," said
Chris Roberts, regional technical strategist at HSBC James Capel.

The chief reasons for the liquidation were pressure on the
currency peg and unusually high interbank rates, brokers said.

The Hong Kong three-month interbank rate was 11 to 12 percent
on Wednesday, up sharply from Tuesday's 9.048 percent.

Hong Kong's Financial Secretary Donald Tsang earlier had
sought to calm investors' fears over the market's volatility.

"Our stock market is solid," he told reporters at a public
function. "Liquidity is adequate in our stock market. But when
the liquidity is adequate, turnover will be high."

Dealers said the sharp fall in the index heightened concern
that selling pressure would intensify on the Hong Kong dollar,
which remained relatively stable, just below 7.75.

Taiwan stocks fell more than two percent in response to the
gyrations in Hong Kong, before recovering toward the close.

"The fall in Hong Kong stocks hurt investors' already fragile
confidence," said Joe Chiou, an analyst at Taiwan Securities in
Taipei.

Taiwan's key index ended down 41.58 points, or 0.54 percent,
at 7,692.47.

Philippine shares shed 64.92 points, or 3.26 percent, to close
at 1,928.97 amid fears a weakening peso will hurt corporate
earnings.

Malaysian stocks were hurt by the sell-off in Hong Kong and
rumors that local brokers are facing financial problems. The
composite index closed down 29.13 points, or 3.83 percent, at
731.17.

Tokyo shares, particularly high-tech firms, took a cue from
Wall Street's 139 point advance and moved higher, encouraged by
strong profits at Microsoft Corp and International Business
Machines Corp.

The key Nikkei 225-share index broke a three-day losing streak
and rose 477.52 points, or 2.77 percent, to close at 17,687.61.

Despite the gains, traders remained cautious because of
Japan's current economic problems.

"There is a widespread bearish outlook on the market," said a
broker at a major securities house.

In Korea, stocks soared in response to news receivership will
be sought for the financially-troubled Kia Motors Corp and Asia
Motors Co Ltd.

The key index broke through the key 600 level to finish 34.47
points, or 6.08 percent, higher at 601.32.

Bangkok's market rose 3.62 points to 511.56 on speculative
buying but sentiment was poor as investors awaited news of a
cabinet reshuffle, particularly who would be appointed finance
minister.

Singapore shares were hit by foreign funds selling on concern
over the meltdown in Hong Kong. The Straits Times Index ended
down 39.54 points, or 2.23 percent, at 1,731.68.

Indonesian shares fell 9.735 points, or 1.89 percent, on
profit taking to 505.233.

Australian stocks firmed 32.2 points, or 1.21 percent, to
2,682.9, while New Zealand shares rallied 23.10 points to close
at 1,355.91, the highest level since before the 1987 crash.