January 13, 1999 4:39 AM
Hong Kong Shares Tumble 4%
NEW YORK -(Dow Jones)- Hong Kong shares suffered their first major sell-off this year, with the key index ending more than 4% lower
Wednesday, as investors dumped stocks on a host of negative news. Tokyo's key stock index rose in mixed trading amid lingering concerns
about the recent volatile dollar-yen rate.
Hong Kong's blue-chip Hang Seng index shed 437.79 points, or 4.1%, to end at an intraday low of 10273.77. Tuesday, it rose 77.29 points, or
0.7%.
Investors were shaken by fresh revelations of financial troubles at two more Guangdong-based companies after the recent collapse of
Guangdong International Trust & Investment Corp. Fears for more fallout triggered a massive sell-off in China-linked shares, said traders.
On top of growing concerns about China-linked shares, Tuesday's sharp slide on Wall Street and a rise in local interbank rates are also adding
bearishness to the market, traders said. The Dow Jones Industrial Average fell 145.21 points to close at 9474.68 Tuesday, while Hong Kong
interbank rates were edging up amid signs that hedge funds may be making a come-back to the territory's money market, the first time since
last August when the Hong Kong government bought blue-chip stocks in a bid to drive out speculators.
Japan's blue-chip Nikkei 225 index ended up 42.63 points, or 0.3%, at 13403.60. Tuesday, it lost 7.51-points. However, losers beat winners 7
to 5 as 375.5 million shares were traded. Also, other major indexes closed lower.
Although some blue-chip exporter shares finished higher on the dollar's rebound, and bank shares rose on short covering, selling of defensive
issues - including drug shares - capped the upside of the Nikkei average, traders said.
"Market sentiment hasn't improved, with the number of retreaters beating gainers, although the rise of international blue chips such as Sony,
Honda and Canon supported the Nikkei average," said Masatoshi Sato, manager of the investor information group at Kankaku Securities.
In late Asian trading, the dollar was quoted at 112.45 yen, little changed from 112.46 yen late Tuesday in New York. The euro was quoted at
$1.1561, lower than $1.1565 in New York.
Brazil's turbulent stock market tumbled again Tuesday, with its benchmark index closing down nearly 8%, amid continued worries about the
country's fiscal future. Other major stock markets in Latin America tracked Brazil sharply lower. In Europe, major equities markets closed
broadly lower after Wall Street posted sharp losses in morning trading.
Brazil's Bovespa Index closed down 487.71 points, or 7.6%, at 5915.55, after dropping 5.6% Monday. However, the Bovespa recovered from a
loss of more than 9% at midafternoon.
Investor concerns mounted that a brewing political battle between Brazilian states and the federal government will spiral out of control. Traders
said the moratorium declared by Minas Gerais state on federal debt last Wednesday continued to hurt investors' confidence in the country. A
second Brazilian state, Rio Grande Do Sul, said late Monday it couldn't pay its debts to the federal government.
"In times like these, no news is bad news," said a trader in Sao Paulo. "The federal government reacted firmly, but investors continue
skeptical about Brazil," he added, referring to the Finance Ministry's decision Monday to block Minas Gerais' share in federal revenue, in
response to the moratorium.
"The market is really nervous," said a trader with one of Brazil's largest private bank in Sao Paulo. "Foreign investors are even cashing in
losses, they just want to leave."
Traders said the mood of investors toward Brazil isn't very encouraging and that the downward trend will be reversed only when "very good"
news breaks. "Wednesday the government may have another victory in Congress, and if that happens, it will certainly be a booster for the
market," said a trader, referring to fiscal-austerity measures scheduled to be voted on during this month's special session in Congress.
In Mexico City, the IPC index tumbled 132.56 points, or 3.7%, to end at 3459.64, after a 1.3% decline the previous session. Mexico's market
continued its seven-day losing streak on growing concerns about Brazil's stability.
Argentina's Merval index lost 14.33 points, or 3.5%, to close at 396.78, following a 3.7% drop Monday. "The market is in a state of suspense
at the moment and won't do anything positive until the situation in Brazil calms a bit," said one Buenos Aires trader. "We may see some
bargain hunting tomorrow which will bring the market off its slide, but it won't last the entire session."
In Europe, London's FT-SE 100 index fell 51.4 points, or 0.8%, to close at 6033.6, after falling 1% Monday. London shares were pressured by
weakness on Wall Street, where blue chips and recent high-flying Internet issues saw heavy profit-taking.
In Frankfurt, the DAX index ended down 70.50 points, or 1.3%, at 5200.10 in floor trading, after the previous session's 2.3% decline. The Xetra
DAX, which tracks electronic trades, fell 70.34 points, or 1.3%, to 5196.13, following Monday's 1.9% drop.
With little corporate news in the market, traders said the expiration of some German futures and options contracts Friday hurt trading. They
added that trading could be somewhat volatile throughout this week as some institutional investors still mull portfolio strategies for 1999.
In Paris, the benchmark CAC 40 index ended down 101.20 points, or 2.4%, at 4100.70, after a 1% decline Monday.
Copyright (c) 1999 Dow Jones & Company, Inc.
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