Hi Pezz, Today's Report: The US dock strike is having an effect, possibly triggering a cleansing of the HK valuation across the financial-scape. Hutchison is a global port and telecom operator, and a HK landlord, and Li&Fung is a company specializing in Asia sourcing. Management of both are very good, and accounts are probably clean. I may buy some if Hong Kong has a minus 900-1000 pts day, a common enough occurrence.
I do not find it easy to buy during distress due to a heightened awareness of devastating danger at possibly every twist and turn in the financial-scape.
Chugs, Jay
Hang Seng falls through 9,000 barrier
scmp.com
Friday, October 4, 2002
JON OGDEN and DAVID WILDER
The Hang Seng Index plunged below 9,000 points to a one-year low yesterday as a strike by US dock workers added to growing fears about the health of Hong Kong's economy.
Exporters were among the hardest hit as the blue-chip benchmark dived 125.03 points, or 1.37 per cent, to close at 8,984.32 points, its lowest since September 21 last year.
In Japan, the Nikkei 225 index also dropped below 9,000 points, shedding 112.9 points to close at a 19-year low of 8,936.43 on fears a tough new stance on bad loans by the government would spark a fresh wave of bankruptcies in the fragile economy.
Early afternoon trading in the US, saw the Dow Jones Industrial Average down 36.13 points at 7,719.48.
In Hong Kong, Hutchison Whampoa slumped 3.6 per cent to $42.80, its lowest close in four years, while trading firm Li & Fung slid 6.08 per cent to $6.95.
"A lot of the exporters have been absolutely hammered," said Jonathan Asante, a fund manager with Framlington Investment Management. "A lot of the exporters are going to be hurt [by the strike] but it is a buying opportunity because I don't think the strike is going to last long."
The worries about the dock strike added to selling on rumours that ratings agency Standard & Poor's would downgrade the SAR's credit rating due to the government's ballooning budget deficit and the durability of the Hong Kong dollar peg.
Forward rates - which indicate the future value of the Hong Kong dollar - blew out as some investors made speculative bets that the currency peg would be abandoned. The market talk was inaccurate and no imminent move to downgrade Hong Kong's A-plus foreign currency ratings was in the works, Ping Chew, S&P's associate director of sovereign ratings, told the Post.
"I can't categorically say there won't be any action, it would be improper of me to say so. But the pressure for a ratings change or an outlook change is not apparent," said Mr Chew.
Hong Kong dollar forward rates have been under pressure since Wednesday when the government announced a budget deficit of $56 billion for the first five months of the financial year.
Some commentators worry that persistent deficits will fast erode fiscal reserves, which have fallen from $444 billion in March 2000 to $316.4 billion.
"So far we don't think these [factors] have enough impact on the rating yet. The government is still sitting on a pile of cash and that gives them the flexibility to absorb the deficit right now," said Mr Chew.
The currency market moves indicate investors are willing to accept an exchange rate of more than $7.82 per US dollar for the ability to lock in the rate one year from now, even though the currency is pegged at $7.80.
"All of this reflects that Hong Kong as an economy is performing miserably," said James Malcolm, regional currency strategist at JPMorgan.
Raymond Tam, a spokesman for Financial Secretary Antony Leung Kam-chung, said there was no plan to change the peg.
And there are no concrete signs that large local firms are betting against the currency, with analysts saying action is confined to professional investors.
"It's just a market play. A real concern [about the peg] would be a signal for much higher rates," said Frederick Laine, regional head of fixed income and derivatives for Credit Lyonnais. |
