Bank of East Asia (BEA) shares shed 6.85 percent yesterday, sparked by rumors spreading around the city questioning the financial stability of the local bank.

The stock slid HK$1.85 to end at HK$25.15, its lowest close since February 2006 despite the reassurance given by the bank's management and government officialsover its financial position.

BEA's shares closed at HK$27 Monday and reopened at HK$26 yesterday morning. The stock once soared to its intraday high at HK$27.25 during the morning trading session.

However, once the post-lunch trading session started, the shares tumbled almost 11 percent and reached HK$23.95, its lowest of the day.

Triggered by rumors over the financial stability of BEA, more than 21 million of the bank's shares changed hands in the first half hour of the afternoon trading session, compared with only 8.2 million shares within the whole day of Tuesday.

The shares showed a slight rebound after the bank's management released a statement claiming that the bank's asset is solid and its capital adequacy ratio is also above international required level.

The bank also said in the statement that "its total outstanding exposures to Lehman Brothers and AIG are HK$422.8 million and HK$49.9 million, respectively."

Despite the reassurance from the bank's management, the stock price continued to fluctuate in the rest of the afternoon session.

The shares ended its yesterday trading by slumping almost 7 percent, reaching its 19-month low, while the benchmark Hang Seng Index (HSI) rose 0.47 percent or 89.14 points to 18,961.99 comparatively.

A total of 61.78 million shares of BEA were traded yesterday, the highest volume since November 2007 when Bank of China (Hong Kong) announced to acquire 5 percent stake of BEA.

Having pended a statement to revise down the first-half earnings of 2008, trading in BEA was once suspended in Hong Kong last Thursday.

The bank claimed to have discovered a loss of HK$93 million in the first six months of 2008 and lowered its after-tax profits to HK$821 million, an 11.7 percent drop from HK$930 million announced in August.

Shares of BEA have dropped almost 53 percent this year, the worst performance among all local banks.

(HK Edition 09/25/2008 page2)