HK to see stormy week amid rate rises, bank woes
09:09 a.m. Jan 11, 1998 Eastern
By Carrie Lee
HONG KONG, Jan 11 (Reuters) - Hong Kong is bracing for a stormy week
ahead, with market sentiment frayed by interest rate rises and concerns
over the troubles of a major local investment bank.
Shares and property prices are poised to come under pressure after major
banks decided last week to raise both their deposit rates and best
lending rates by 75 basis points.
But the rate hikes may just be the start, with prominent banker David
Li, chairman of Bank of East Asia Ltd, predicting another half a
percentage point rise in interest rates in the next three to four
months.
On Friday, investment bank Peregrine Investments Holdings Ltd rattled
market nerves by announcing the collapse of a life-line deal which would
have injected US$200 million in fresh capital into the troubled firm.
The economic crisis which has pummelled Asian currencies and stocks has
left Peregrine, one of Asia's largest independent investment banks,
fighting to hold together its Asian empire.
A company official acknowledged that the survival of Peregrine hinged on
whether it could secure new investors.
While the bank was already in talks with potential investors, the
Peregrine saga looks set to shatter confidence in the already depressed
stock market.
Peregrine chairman Philip Tose said investment sentiment in local shares
was very poor and the blue-chip Hang Seng Index might slump to 7,000 on
Monday, the Apple Daily reported.
Interest rate rises and Peregrine's woes already took their toll on Hong
Kong stocks traded in London, with the Hang Seng London Reference Index
losing 513.82 points, or 5.78 percent, to close at 8,380.82 on Friday.
Earlier, in local trading, Hong Kong stocks fell to their lowest levels
in more than two-and-a-half years on jitters about the Asian market
turmoil and higher local interbank rates.
The Hang Seng Index slumped 359.89 points, or 3.89 percent, to close at
8,894.64, its lowest close since May 10, 1995.
Asia's financial troubles and ensuing economic downturn have forced the
closure of a number of companies, and more are expected to follow.
Hong Kong, the city reputed to have the most licensed restaurants in the
world, could see the closure of up to 800 eating establishments in the
next nine months, an industry expert told the South China Morning Post
on Sunday.
The government rushed to allay jitters in the territory over the
weekend.
Financial Secretary Donald Tsang said Peregrine's problems had already
been much digested by the stock market, and urged investors to react
rationally.
He also said investors in Hong Kong would not suffer repercussions from
difficulties facing the investment bank.
Hong Kong Monetary Authority Deputy Chief Executive David Carse said
Peregrine's difficulties should not have a knock-on effect on other
banks.
Hong Kong Chief Secretary Anson Chan firmly denied rumours that the
government was reviewing the local currency peg to the U.S. dollar,
saying the 14-year-old linked exchange regime which pegs the two
currencies at HK$7.8 to US$1 is to stay.
She called for steady nerves, cool heads and prudence in the face of
volatility in currency and stock markets. ^REUTERS@ |
