A man takes a look at a display board showing stock prices yesterday. Hong Kong benchmark index plunged more than 7 percent on fears of the global financial crisis at the morning session yesterday. The blue-chip Hang Seng Index tanked 1350.1 points, or 7.7 percent, to 16287.09. AP

Hong Kong shares recovered an early loss of 1,353 points to close flat yesterday, following a worldwide capital injection by central banks to ease liquidity pressure in money markets.

Hang Seng Index plummeted to an intraday low of 16,283.72 in the morning session, which is a 26-month low.

The roller-coaster rally failed to convince analysts that shares have hit the bottom, with some saying things will get worse before getting better. But some said a rebound may occur in the coming days, after the mainland announced to scrap stock purchase stamp tax and encouraged its State-owned firms to buy back shares late yesterday.

The blue-chip index, at one time, tumbled as much as 7.7 percent, as investors continued dumping mainland financial stocks amid a financial hurricane raging through global markets.

But the news of money injection by the world's major central banks brought a turnaround in the afternoon, pushing up the index to close the day only 4.73 points lower at 17,632.46.

The index slumped 15 percent in seven straight days of losses, taking year-to-date declines to almost 37 percent.

Mainboard turnover rose to HK$102.2 billion, its largest since April, from HK$76.2 billion at mid-day on Wednesday.

"The Hang Seng Index has fallen 4,000 points in just 17 days so it was in a heavily oversold condition. While a lot depends on how overseas markets hold up tonight. We are likely to have bottomed at 16,300 in the near term," said Patrick Yiu, associate director with CASH Asset Management.

The China Enterprises Index, which tracks top locally listed mainland firms, ended down 0.4 percent.

The index had fallen over 10 percent earlier Thursday tracking steep 6.5 percent drop on the Shanghai bourse but was lifted off lows as the Shanghai market bounced back to close 1.7 percent lower.

The world's largest wireless carrier, China Mobile, finished up 4.3 percent at HK$73.20 after hitting a 17-month low of HK$66 earlier Thursday.

China Unicom gained 10.8 percent after its proposed merger with China Netcom was approved by shareholders of both companies on Wednesday.

Fixed-line service operator China Netcom advanced 6.8 percent.

The merger, which is expected to bolster Unicom's presence in the wireless telephony market and create a stronger rival for market leader China Mobile, will become effective on Oct 15.

Gold miners surged following a record rally in the price of the precious metal due to heavy safe-haven buying as outlook for global equity markets remained bleak. Spot gold jumped more than $86 an ounce on Wednesday and was trading around $865 an ounce yesterday.

Zijin Mining rallied 20.7 percent, while Sino Gold soared 27.9 percent. Zhaojin Mining climbed 31.4 percent.

Reuters contributed to the story

(HK Edition 09/19/2008 page1)