From the opening bell the market was anticipating bad news from a government announcement of revised first-quarter gross domestic product figures.
The gloomsters were soon vindicated when it was officially admitted that the original forecast of a 2 per cent fall in GDP in the first quarter, the worst for over a decade, was not pessimistic enough. The government now says that there was a 2.8 per cent decline.
Sir Donald Tsang, the Financial Secretary, also confirmed that the second quarter figures, to be released soon, are "unlikely to be good". Reflecting a general view that the economy has declined even further in recent months, he said he thought these figures were likely to be "pretty miserable by Hong Kong standards."
In other words the government is finally verging on admitting that this once ever-growing economy has slipped into recession. Tang Kwong-yiu, the chief government economist, also signaled that the outlook for the rest of the year was bleak. He said "I don't expect any improvement in the Asian environment'.
Sir Donald said that he would have to look again at his March budget forecast, which predicted that the economy would grow by 3.5 per cent this year. No private sector forecaster sees economic growth as likely this year.
Ian Perkin, the chief economist for the Hong Kong General Chamber of Commerce, said that the second-quarter GDP fall could exceed 3 per cent and that no upturn was expected before the fourth quarter.
The economic figures, and a particularly poor performance for HSBC Holding's Hong Kong main subsidiaries (the Hongkong and Hang Seng banks) also announced yesterday, prompted a significant fall in share prices, leaving the blue chip Hang Seng Index almost 5 per cent down on the day, a fall of 383 points.
The sell-off was fuelled by bad news. In Japan, record low opinion poll ratings for the new government and the decline of the yen below 145 to the dollar, confirmed fears that Tokyo was unlikely to lead the way out of the crisis.
A sharp decline in domestic spending, combined with an even bigger fall in the tourist trade lies behind the downward revision of the GDP figures announced yesterday.
"I still can't find any good news," said James Osborn, the director of sales at ING Barings Securities in Hong Kong, "given that it's hard to put even long-term investors in the market at the moment."Reuse content