Market braces for fresh fall
Hang Seng's key 10,000-point barrier at risk following rise in US jobless rate, say analysts
DAVID WILDER and STAFF REPORTERS
Stocks are expected to crash through the 10,000 barrier for the first time since February 1999 today after the release of dismal US unemployment figures on Friday.
A wave of bearish sentiment sent the Hang Seng Index plunging 706.28 points, or 6.36 per cent, last week to close on Friday at 10,384.2.
Analysts said Hong Kong could be expected to fall in the wake of the news that the US jobless rate rose to a four-year high of 4.9 per cent in August, from 4.5 per cent in July.
The latest figures could have a disastrous impact on consumer spending, long seen as one of the few surviving pillars of US economic activity.
US and European markets tumbled on the news on Friday, with the Dow Jones Industrial Average shedding 2.39 per cent to 9,605.85 and the S&P 500 - a broader indicator of US equities - slumping 1.86 per cent to an October 1998 low of 1,085.78.
''I think there is a high probability we are going to break the 10,000-point level - probably [today] - given the very poor performance from US and European markets on Friday,'' said Tanrich Asset Management director Kennis Leung.
Adding to the negative sentiment was last week's news that Japan's economy contracted by 0.8 per cent in the second quarter, raising fears of a fourth recession in 10 years. The news sent the Nikkei 225 closer to the 10,000 level last week, closing down 1.25 per cent to 10,516.79 on Friday.
Phillip Securities research head Louis Wong Wai-kit said: ''It seems that they are all in league - the Nikkei and Hang Seng are headed for four-digit territory.''
Market sentiment could also be dampened after Finance Minister Xiang Huaicheng said at the weekend that China's export growth may fall below the 10 per cent target for this year because of the global slowdown.
''This year the export growth target is 10 per cent. A little below 10 per cent is also possible. This shows China and the Government are facing difficulties,'' Mr Xiang said after the close of a meeting of Asia-Pacific Economic Co-operation finance ministers in Suzhou. China's exports rose 8.4 per cent year-on-year in the first seven months of this year, well short of the 27.8 per cent surge for the whole of last year.
The meeting was overshadowed by a revised forecast for the world economy by the International Monetary Fund, whose head, Horst Koehler, told delegates on Saturday it had lowered its 2001 economic growth forecast from 3.2 per cent to 2.7 per cent. His projection for next year is 3.6 per cent with a slight recovery to three per cent growth forecast for the Asia-Pacific region.
The stream of bad news could weigh heavily on the Hang Seng in the long-term. ING Barings head of research in Hong Kong, Xen Gladstone, believed the market could bottom at 8,150 points.
However, analysts were encouraged by reports that Hong Kong Exchanges and Clearing was considering delaying the release of the latest batch of Tracker Fund units. Yang Ti Liang, chairman of Exchange Fund Investment, did not rule out a suspension. ''It depends on the local and US stock markets,'' he said.
Advisers to Chief Executive Tung Chee-hwa agreed it was not the right time to sell the Tracker Fund. Executive Councillor Raymond Ch'ien Kuo-fung said the Government would not sell shares acquired during the 1998 market intervention while the economy was still in bad shape.
A further sign of the economic malaise came with a march to Central Government Offices by more than 600 Federation of Trade Unions members demanding urgent measures be taken against unemployment.
Some claimed they had to resort to living on their savings as the economy had claimed many long-term jobs, leaving workers to compete for low-paid temporary posts. |
