Hong Kong stocks plummet

HONG KONG (Reuter) - Hong Kong shares crashed yesterday under the weight of Chinese fury at Chris Patten's decision to press ahead with political reform.

The Hang Seng index plunged 6 per cent within minutes of the opening of trading, later rebounding a little as brave souls gambled on the panic being short-lived and bought stocks again. After a day of sharp fluctuations the index closed down 315.29 points (5.12 per cent) at 5,854.

But, with Hong Kong's wider economy seemingly oblivious to the long-running row with China, brokers ended the day in a cautiously optimistic mood.

'I think that really the selling was overdone and there should be a bit of a rebound in prices tomorrow,' said Willie Chau, Crosby Securities' chief dealer.

Market players drove share prices to record highs a week ago, believing Britain and China were on the verge of opening talks on the 1995 legislative elections in Hong Kong, the last before the colony returns to China in 1997.

But their hopes were dashed as Mr Patten, the Governor, announced on Friday that Sino-British diplomatic contacts had failed to produce an agreement to negotiate, and as a result he would publish legislation introducing more democracy in 1995.

Share price movements since Mr Patten unveiled his plans last October suggest little interest in democracy among investors and the hope of a return to the pre- Patten British attitude to China.

The Hang Seng index moved higher when the Governor entered hospital briefly for heart surgery in early February. It still stands nearly 20 per cent above the depths it plumbed in early December after China threatened to tear up contracts signed by the present Hong Kong government after 1997.

Analysts say only political fears have prevented stocks soaring far higher this year, pointing to the colony's 5 per cent growth, the benefits from China's boom and the low p/e ratios of shares.