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Joseph Lo

Hang Seng Index may drop further amid concerns  that growth in  the US economy  is slowing

The Hong Kong market fell 2.08 per cent yesterday amid mounting concerns that economic growth in the United States  was slowing.

The Hang Seng Index recorded its biggest single-day fall since June last year, taking it perilously close to its lowest trading level this year, when it  slipped to 13,320.53 points in January.

Some brokers  expected the slide in stock prices to continue indefinitely, especially if the index were to  fall beyond its January low.

The index shed 283.52 points to close at 13,355.23 amid across-the-board selling pressure.

Tai Fook Securities head of research Marco Mak said: 'The slide in the Hong Kong market was largely due to the  tremors on Wall Street last week.'

Brokers  expected  global stocks  to  remain under pressure this week after the Dow Jones Industrial Average  took a combined 361 point  dive between Tuesday and Friday last week, it's  the sharpest fall within a week since August.

But market watchers still expressed surprise at  yesterday's rapid  decline.

Brokers said they had expected greater volatility  rather than an outright drop, as American depositary receipts  of Hong Kong stocks traded in New York  reacted to the decline on Wall Street last Friday with an average loss of just 0.8 per cent, outperforming the US market.

Instead, the Hang Seng Index sank nearly 280 points within  15 minutes of the opening bell yesterday and did not recover over the remainder of the  session.

'We're all going to be watching the US stocks  to see what direction the market will take over the coming days,' said Phillip Securities research director Louis Wong Wai-kit.

'There are quite a few earnings reports yet to come out of the US, and if Wall Street continues to fall, that could be negative for local stocks,' he said.

Mr Wong said that if the  index fell below 13,321 points,  there would be little support until  it reached its 250-day moving average of about 13,000.

'We're very close to the year low and if we penetrate this level, the next support will be the 250-day moving average,' he said.

Of the   blue chips, only Television Broadcasts  gained yesterday.

TVB  rose 0.98 per cent, or 40 cents, to $41.30   after  reports at the weekend that  the government had  permitted it to deliver its Galaxy satellite pay-television service through a cable network.

Lenovo, the mainland's biggest personal computer maker, was the worst-hit counter,  falling a further 6.93 per cent, or 17.5 cents, to $2.35  after Friday's 3.8 per cent decline.

The firm, which is buying IBM's personal computer business for US$1.25 billion,  was hit hard  by  IBM's worse than expected first-quarter profit  released  on Thursday.

'Lenovo suffered the most from the Wall Street decline, and it took other IT and telecoms companies down with it,' Mr Mak said.

City Telecom fell 6.25 per cent to $1.05, while Stone  slipped 5.36 per cent to 53 cents.

HSBC fell 1.21 per cent, or $1.50, to $122.50.

But brokers  were optimistic that the index had already neared its bottom, given that locally traded stocks were outperforming their US and regional counterparts  on the decline.

'I expect that a further sell-off in the market would be  temporary, as our economic fundamentals are still very good,' Mr Wong said.

Investors were generally  unfazed  by Hong Kong's economic prospects  given the strong rebound in employment and tourism.

'There's a  tremor in the markets, but I don't see a continued slide,' Mr Mak said.

The H-share index fell 3.1 per cent to 4,572.35 points, partly as  Chinese oil-related stocks followed the price of crude  downward to a two-month low.

Oil prices had soared to more than US$58 a barrel in recent weeks after Goldman Sachs warned earlier this month that  crude oil could reach as high as US$105 a barrel.

Crude oil for May delivery fell as much as 83 cents, or 1.6 per cent, to US$49.66 a barrel, the lowest price on the New York Mercantile Exchange since February.

Offshore oil producer CNOOC fell 4.24 per cent to $3.95, while PetroChina, the biggest mainland oil company, dropped 2.6 per cent to $4.675.



Stocks falter after Wall St  losses unnerve investors