HSI rebounds with 1.13pc gain
Stocks recoup losses in volatile trading on hopes of US Fed measures
Hong Kong stocks struggled through a volatile session yesterday amid rising fears of subprime losses in the United States, sliding 3.85 per cent in the morning before staging a rally in the afternoon.
Taking its cue from a drop in US markets on Monday, the Hang Seng Index opened sharply lower before recovering after lunch to close 1.13 per cent higher at 27,771.21 points.
Traders said speculation of an emergency Federal Reserve meeting to discuss market relief measures spurred gains in the afternoon. The Fed was due to release minutes from its latest meeting today.
Hit by concerns over increasing loan defaults in the US subprime crisis and delays to a key mainland investment scheme, the Hang Seng Index is 12.22 per cent below a record 31,638.22 reached on October 30.
Charles Huang, the head of mainland small and mid-capitalised research at BNP Paribas, expects the index to fall to as low as 20,000 points in the next 12 months.
'In the short term, the Hang Seng Index will see more corrections,' Mr Huang said. 'Without strong support from money inflows and if global and mainland markets become more volatile, the index may fall further.'
The blue-chip index surged 50 per cent between mid-August and the end of last month as investors bet the so-called 'through-train' scheme, allowing mainlanders to invest directly in Hong Kong stocks, would unleash a wall of money.
Beijing has since delayed the scheme, as well as launched a crackdown on illicit money flowing into Hong Kong through underground lenders.
H shares recovered from a 4.78 per cent fall in early trading to close 2.01 per cent up at 16,867.38 points.
'Hong Kong was oversold so we saw a strong rally in the afternoon,' said Phillip Securities director Louis Wong Wai-kit.
Patrick Yiu Ho-yin, an associate director at CASH Asset Management, said the rebound was helped by the strong performance of Japanese and mainland markets. 'Investors are still cautious despite a higher daily turnover,' he said.
Turnover climbed to HK$146.41 billion from HK$103.96 billion on Monday.
The Shanghai Composite Index rose 0.45 per cent while the Shenzhen Composite Index closed 1.82 per cent higher.
Hong Kong stocks 'were just following the Dow', said Gen Lee, a manager of principal trading at Standard Bank. 'The past two weeks has been relatively weaker in general.'
Citi said weak Asian markets led to an outflow of US$2.6 billion from Asian funds last week. 'China, India and Hong Kong, the three most expensive markets in Asia, faced their biggest redemptions in 12 weeks,' analyst Elaine Chu said.
Mr Wong said with US markets closed on Thursday for Thanksgiving, volatility would continue.
