Hang Seng drops 5% in sudden flurry

The Hong Kong stock market's blue-chip Hang Seng Index shed almost 710 points yesterday, a fall of 5 per cent and the biggest drop since the beginning of the recent stock market carnage in East Asia. The sell- off in Hong Kong was far greater than in neighbouring markets, although they did remain in the doldrums.

The turmoil in Hong Kong is taking no hostages, with some of the biggest companies having millions of dollars wiped off the value of their shares. HSBC Holdings, the biggest company on the exchange, saw HK$13 knocked off its price, a one-day fall of 6 per cent.

When traders got to their desks yesterday they noted a decline in the volume of business and looked set for no more than a modest fall in the Hang Seng Index. At the morning close it was down just 141 points.

However, in the last half hour of trading, the market burst to life with big overseas institutional investors pouring in sell orders. Most came from Europe where fund managers appeared to be taking a negative view of East Asian markets.

The Hang Seng Index has shed 2,173 points in the past six days of trading, registering one of the biggest periods of decline in the Hong Kong exchange's history. "Our market doesn't have a problem," said Sir Donald Tsang, the territory's Financial Secretary, who is trying to talk up prices.

Until yesterday he only needed to talk up the blue chips, as non-blue chip stocks had been in only modest decline compared with the Hang Seng Index constituents. This changed sharply with a sudden plunge of more than 10 per cent in the value of H-shares, the shares controlled by Chinese state corporations. Howard Georges, the managing director of South China Brokerage, said investors in China-associated stocks had become "a bit panicky" as they saw other parts of the market slump and started to offload their shares in a rush.

"Hong Kong tends to do things very sharply and savagely", Mr Georges said. He was not sure when a rebound could be expected but insisted that "Hong Kong fundamentals are really pretty OK".

Brokers' analysts cited fears over the local currency and rises in interest rates as reasons for the sell-off but it seemed more likely that herd mentality had gripped the market, causing a stampede into cash.

Meanwhile, the Hong Kong dollar came under renewed selling pressure but, as ever, aggressive market intervention by the Hong Kong Monetary Authority held the local currency close to its fixed link with the US dollar.

In Indonesia the authorities tried to curb the forward selling of the local currency as a means of shoring up its value but the rupiah continued to slide alongside share prices.

The Singapore dollar, which became entangled in the Asia-wide currency decline, despite its underlying strength, is showing signs of recovery but it was not enough to enthuse investors, who knocked another 1 per cent off the value of shares yesterday.

The Japanese market, which had remained aloof from the turmoil elsewhere in Asia, saw the blue-chip Nikkei 225 slide by 255 points, a loss of slightly more than 1 per cent.

In Bangkok, where share prices fell more than 10 per cent last week on top of a similar fall the week before, investors were treading water as the coalition government announced it had applied for another $25m to boost the World Bank's rescue package to $17.5bn.

Now that East Asian shares and currencies have lost their lustre it will be difficult to lure big fund managers back into these markets. A few weeks ago they were prepared to pay high prices for the shares they are off-loading like a bad smell. Their anxiety to off-load is intensifying as the East Asian markets become illiquid. This leaves the managers turning to the most liquid of the markets, notably Hong Kong, where large positions are being liquidated, regardless of their underlying value.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Masterchef cooks Tony Rodd (left), Emma Spitzer (second left) and
Simon Wood (right) posing with judges Gregg Wallace (centre) and John Torode (second right), as the three will be seen cooking their hearts out in the hopes of winning the show.
TVReview: Tired Geography teacher John Torode and shaved Scotch egg Gregg Wallace crown the champion
Ukip leader Nigel Farage in Tiny Tim’s tea shop while canvassing in Rochester this week
Life and Style
The Grand Palais in Paris will be transformed into a 4,000-seat cinema, with 44 double beds at the front
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Recruitment Genius: Administrator - IFA Based

£22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

Day In a Page

Major medical journal Lancet under attack for 'extremist hate propaganda' over its coverage of the Israeli-Palestinian conflict

Lancet accused of 'anti-Israel hate propaganda' over coverage of Gaza conflict

Threat to free speech as publishers of renowned medical journal are accused of inciting hatred and violence
General Election 2015: Tories and Lib Dems throw their star names west to grab votes

All noisy on the Lib Dems' western front

The party has deployed its big guns in Cornwall to save its seats there. Simon Usborne heads to the heart of the battle
How Etsy became a crafty little earner: The online market has been floated for £1.2bn, but can craft and capitalism coexist?

How Etsy became a crafty little earner

The online market has been floated for £1.2bn, but can craft and capitalism coexist?
Guy Ritchie is the latest filmmaker to tackle King Arthur - one of our most versatile heroes

King Arthur is inspiring Guy Ritchie

Raluca Radulescu explains why his many permutations - from folk hero to chick-lit hunk - never cease to fascinate
Apple Watch: Will it live up to expectations for the man or woman on the street?

Apple Watch: Will it live up to expectations?

The Apple Watch has apparently sold millions even before its launch tomorrow
Don't fear the artichoke: it's a good cook's staple, with more choice than you'd think

Don't fear the artichoke

Artichokes are scary - they've got spikes and hairy bits, and British cooks tend to give them a wide berth. But they're an essential and delicious part of Italian cuisine
11 best men's socks

11 best men's socks

Make a statement with your accessories, starting from the bottom up
Paul Scholes column: Eden Hazard would be my Player of the Year – but I wonder if he has that appetite for goals of Messi or Ronaldo

Paul Scholes column

Hazard would be my Player of the Year – but I wonder if he has that appetite for goals of Messi or Ronaldo
Frank Warren: Tyson Fury will be closely watching Wladimir Klitschko... when he wins it'll be time to do a deal

Frank Warren's Ringside

Tyson Fury will be closely watching Wladimir Klitschko... when he wins it'll be time to do a deal
London Marathon 2015: Kenya's brothers in arms Wilson Kipsang and Dennis Kimetto ready to take on world

Kenya's brothers in arms take on world

Last year Wilson Kipsang had his marathon record taken off him by training partner and friend Dennis Kimetto. They talk about facing off in the London Marathon
Natalie Bennett interview: I've lost track of the last time I saw my Dad but it's not because I refuse to fly

Natalie Bennett interview: I've lost track of the last time I saw my Dad

Green leader prefers to stay clear of her 'painful' family memories but is more open about 'utterly unreasonable' personal attacks
Syria conflict: Khorasan return with a fresh influx of fighters awaiting the order to start 'shooting the birds'

Khorasan is back in Syria

America said these al-Qaeda militants were bombed out of the country last year - but Kim Sengupta hears a different story
General Election 2015: Is William Cash the man to woo Warwickshire North for Ukip?

On the campaign trail with Ukip

Is William Cash the man to woo Warwickshire North?
Four rival Robin Hood movies get Hollywood go-head - and Friar Tuck will become a superhero

Expect a rush on men's tights

Studios line up four Robin Hoods productions
Peter Kay's Car Share: BBC show is the comedian's first TV sitcom in a decade

In the driving seat: Peter Kay

Car Share is the comedian's first TV sitcom in a decade. The programme's co-creator Paul Coleman reveals the challenges of getting the show on the road