One trader described the day's business as "crazy, just crazy". He said that early indications were good as the London Hang Seng Reference Index had risen overnight. However, towards the end of the morning session investors seemed disinclined to believe the good news and started flooding the market with sell orders.
By the end of the day some big institutional buyers, including Hong Kong's most high-profile businessman, Li Ka-shing, were reported to be coming back to the market, snapping up blue chips. Morgan Stanley was also reported to have been active in the market on behalf of some heavyweight clients. The securities house's activity sparked enthusiasm which carried through into the afternoon's trading.
The finance sector, led by HSBC Holdings and its subsidiary the Hang Seng Index, registered the best performance with an overall 3.6 per cent gain.
However, enthusiasm for blue chips was not reflected elsewhere in the market where China associated stocks took a hammering, following on from the pounding they received the day before. The index measuring stocks controlled by Chinese state-run companies fell more than 12 per cent. Meanwhile, the ``red chip'' index tracking the shares of China associated companies fell almost 10 per cent.
The big plunge in these shares led to rumours that China was withdrawing its support from the market. However, the Chinese government quickly rushed out an assurance that it would not take any measures to undermine Hong Kong's economic stability. The improvement in blue chip share prices reverses a five-day sell-off, which followed a period of lacklustre trading in the equity of Hong Kong's leading companies. While this was under way smaller counters and Chinese- related shares saw unprecedented volumes of trading and little price loss.
Yesterday, the all ordinaries index dipped by slightly more than 1 per cent, suggesting that the market as a whole was far from in a state of recovery. This underlines the feeling that a single day's change of sentiment is insufficient to bring the bulls back into the Hong Kong market. "The short-term outlook remains volatile and bearishly based," said a commentary by Nikko Securities yesterday.
The relatively good news from Hong Kong was reflected to a more limited extent in both South Korea and Singapore, where share prices rose modestly. In Bangkok the troubled stock exchange finally stopped falling and registered a 4.4 per cent increase. However, the Thai baht hit a new low against the US Dollar, closing at 34.65. The same fate befell the Philippine peso, which slumped to a record low against the dollar.
Meanwhile the ever-volatile Taiwan market continued to plunge alongside the B share markets in China which are open to foreign participation.
In Malaysia, where both share prices and the local currency registered declines, Prime Minister Mahathir Mohamed returned to the fray, hitting out at international speculators who have wiped 35 per cent off the value of the Malaysian ringgitt in recent weeks. "We should shoot these people," he said.