Hong Kong plummets amid fears of tighter bank lending

HONG KONG (Bloomberg) - Hong Kong stock prices slumped yesterday as investors deserted following a fall in South-east Asian equity markets and as fears of a tightening in banks' home mortgage lending increased, brokers said.

At the close, the Hang Seng index was down 443.08 points, or 4 per cent, at 10,712.73 after dropping 211.13 points yesterday. The index has now shed 1,883.35 points, or 14.95 per cent, from its all-time high of 12,599.23 on 4 January. 'It is a case of Asian flu,' said Barry Yates, director at Vickers Ballas Hong Kong. 'There must be a certain amount of money running out of the region.'

But he said the low turnover indicated that the fall was orderly and there wasn't a panic-stricken sell-off. 'The buyers are stepping aside and prices are being marked down,' Mr Yates said.

Real estate stocks were hit hard because of speculation that banks are poised to tighten mortgage lending rules and such a move could hurt apartment prices, Mr Yates said.

The Hang Seng index climbed 33 per cent in December from 9,125.21 at the beginning of the month.

By late yesterday Singapore's Straits Times Industrials index had fallen by 4 per cent while Kuala Lumpur's benchmark index for Malaysian stocks was 5.97 per cent lower.

'This is really happening all over the place but we don't know yet whether we are seeing people raising cash to invest in their own domestic markets,' said David Bulbeck, assistant director at Schroder Securities (Hong Kong). Japanese and American investors were among those taking profits.

Against the trend, Tokyo's Nikkei 225 index gained 308.63 as local investors sought refuge from the collapse in other Asian markets.