HK investors take fright as debt rumours hit market

Fears that a big property group might default on its debts triggered a 647-point fall in Hong Kong share prices yesterday, reports Stephen Vines. Meanwhile, the International Monetary Fund appears to have forced the Indonesian government into finally accepting the terms of its $43bn rescue package.

Rumour proved to be the most powerful force in the Hong Kong stock market yesterday as investors took fright from reports that the Sino Group, a major property developer controlled by the Ng family, would be forced to default on short term debts. The Hang Seng fell 7 per cent.

The rumours sent the shares of Sino Hotels down 51 per cent, with Sino Land plunging 45 per cent and its associated company, TST Properties, falling 34 per cent. Fears of default also helped fuel significant declines in the shares of HSBC Holdings, one of the two large Hong Kong banks who are lenders to the Sino Group.

"The directors wish to state categorically that there is absolutely no ground to such rumours ... the Sino Group is able to pay its loans as they become due and has sufficient working capital," the company said.

Those with long memories in the Hong Kong market recalled that the Ng family almost caused the collapse of the entire Hong Kong stock market in the wake of the 1987 crash when they were left holding massive uncovered futures positions which they were prepared to default on but were persuaded to settle in part following a government bail-out.

Ten years on, the Sino Group has bounced back and has gained a reputation as one of the most aggressive major-league property developers. It also has a reputation for high gearing. However, few analysts believe that the company would go so far as to default on its loans. Nikko Securities, in a commentary, described the situation at Sino as "tight" but believed that the company would deal with it by lowering prices for pre-sales of new projects.

Meanwhile in Indonesia, which has been casting a spell of gloom over the following last week's Alice in Wonderland budget, the government has been forced to concede to the conditions laid down by the IMF.

An agreement, signed yesterday by President Suharto and IMF managing director, Michel Camdessus, provides for: restructuring in the financial sector; and an end to special privileges for a number of monopolies and projects controlled by members of the Suharto clan. It will abolish a clutch of subsidies which have helped keep the poor off the breadline. However, vital controls on rice and fuel prices escaped the net because of real fears that this could provoke social unrest.

The initial response of investors was less than encouraging. The local currency lost another 12 per cent of its value and share prices dropped 4 per cent.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
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

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific