HK stocks reverse early losses to finish positive

Dikky Sinn , The Associated Press , Hong Kong | Tue, 09/30/2008 4:50 PM | Business

Hong Kong's stock market erased its early losses to close trading slightly higher Tuesday as investors snapped up shares beaten down by dismay over U.S. lawmakers' rejection of a bank bailout plan.

The benchmark Hang Seng index plunged as much as 6 percent in early trading but recovered to end the day up 135.5 points, or 0.76 percent, at 18,016.21.

Investors were initially shocked by the huge sell-off on Wall Street overnight after the U.S. House of Representatives rejected a rescue plan aimed at bailing out the troubled banking sector and avoiding an economic meltdown.

But as stock prices tumbled, some investors snapped up shares, viewing them as oversold, analysts said.

"The massive sell-off on Wall Streets sends a signal to U.S. lawmakers that they must give their approval when the rescue plan is submitted again," said Francis Lun, general manager of Fulbright Securities Ltd.

In Washington, congressional leaders and officials are scrambling to revise the bailout proposal in hopes that it would acquire the support need to pass.

Traders, however, remain pessimistic about the market outlook, saying the U.S. failure to pass the rescue plan will deepen the global economic crisis.

"With the bailout plan being rejected, difficulties faced by many U.S. financial institutions are yet to be resolved," Sun Hung Kai Financial analyst Castor Pang said. "The downward movement will continue for a period of time in the U.S. and Hong Kong markets will inevitably follow suit."

After market close, Hong Kong's financial chief John Tsang said the territory's de facto central bank will introduce a series of temporary measures to provide more liquidity in the banking system as there are worries about credit tightening and liquidity shortage.

The new measure will take effect Thursday until March next year.

Stocks were mixed after Tuesday's trading, with bank giant HSBC losing 0.5 percent to HK$121.8. ICBC, China's biggest lender, added 1.6 percent and China Construction Bank was 2.7 percent higher.

Chinese insurer Ping An gained 3.4 percent to HK$44 after losing over 6 percent in early trade. Rival China Life also moved 2 percent higher.

Property developers extended their losses from Monday's drop as more banks followed HSBC's lead in raising mortgage rates. Sino Land slid 4.5 percent to HK$8.5 and Sun Hung Kai Property falling 3.3 percent to HK$78.4.

Hong Kong's financial markets will be closed Wednesday for a National Day holiday.

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