Asian Market News

Friday October 10, 10:13 AM
Hk shares end at 3-yr low; worst wk since Asian crisis

HONG KONG, Oct 10 (Reuters) - Hong Kong shares sank 7.2 percent to a nearly three-year low on Friday, mirroring sell-offs in markets across the globe as investors worried about the risks of a global recession.

The main index dropped 16.3 percent, or more than 2,800 points, in its worst weekly percentage drop since the market meltdown of January 1998.

'It's not about valuations, it's not about fundamentals, it's only about sentiment. And for as long as the sentiment is this weak, we will continue to fall,' said Andrew Sullivan, sales trader with Main First Securities.

The valuations of blue chip stocks is languishing at a 10-year low and rapidly heading towards the bottom touched during the Asian financial crisis of 1997/98.

'The rate cuts have had no impact and the bailout plan will kick in only next month...investors are concerned,' he said.

The benchmark Hang Seng Index dropped 1,146.37 points to 14,796.87 after earlier falling to 14,398.54, its lowest since November 2005. The index plunged 9.7 percent in the afternoon after major European indexes tumbled 10 percent in arly trade.

Brokers said there was no sign of panic-selling on Friday, since most retail investors apparently had sold down their holdings in the first part of the week while funds had most likely pulled out their money earlier on.

Mainboard turnover stayed slim at HK$69.4 billion but higher than Thursday's HK$60.9 billion.

The main index has shaved off more than half its value since it hit a peak of 31,958.41 in October 2007, piggybacking on China's resurgent economy and financial markets.

Only 34 of the 1,088 traded issues rose on Friday, while the Hang Seng Index and China Enterprises Index were awash with red tickers, with some of the world's largest stocks piling up double digit losses

The China Enterprises Index of top locally listed mainland Chinese companies shed 7.9 percent at 7,135.80.

The Dow Jones Industrial Average nosedived 7.3 percent on Thursday, falling below 8,600 points for the first time since May 2003.

In Asia, the Japan's Nikkei 225 (news) toppled 9.6 percent, to mark its biggest percentage fall since 1987.

FINANCIALS, RESOURCES BEATEN DOWN

Financial stocks were the biggest losers, with Europe's top bank, HSBC Holdings (LSE: HSBA.L - news) , slumping 7 percent. China's biggest lender, ICBC, lost 7.4 percent while smaller rival China Construction Bank gave up 7.6 percent.

'It's not about interest rate cuts or liquidity any more, its a matter of confidence, and nobody seems to trust the other anymore,' said Steven Leung, sales director at UOB Kay Hian.

'The confidence crisis may be resolved only when central banks inject liquidity into the banks by buying up stakes. We have to see if the central banks will expose themselves to that kind of risk.'

China's largest insurer China Life led decliners on the H-share index, dropping 13 percent to HK$22.40, its worst close since March 2007.

A 9.4 percent drop on the global freight index pummelled shipping stocks, with China's largest shipping conglomerate, China Cosco, plunging 8 percent while port operator Cosco Pacific (1199.HK - news) dropped 12.5 percent. The Baltic Dry Index, which gauges changes in the cost of shipping commodities, fell to a nearly two-and-a-half year low on Thursday.

On Friday, energy stocks were battered as crude prices slid to a new one-year low on worries that the financial market turmoil will cut into demand.

Asia's largest oil & gas producer, PetroChina dropped 5.8 percent while offshore oil specialist CNOOC (0883.HK - news) tumbled 9.2 percent.

Coal miner China Shenhua Energy shrank 9.3 percent to HK$13.60, joining the rout in the commodity stocks despite a Citigroup (NYSE: C - news) upgrade on the stock. The brokerage revised its rating on the stock to buy from sell with a target price of HK$19.3.

(Reporting by Parvathy Ullatil; Editing by Ken Wills)

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