The Hang Seng Index plummets again, this time shedding its most, percentage-wise, since 1997. The loss brings the market to its lowest level in four years. Edmond Tang

Hong Kong shares plunged 12.7 percent yesterday in their biggest single-day percentage drop since 1997.

Heavyweight HSBC led the way with a double-digit loss as fears of a global recession hammered Asian financial markets.

The benchmark Hang Seng Index (HSI) closed down 1,602.54 points to 11,015.84, its lowest level since mid-2004. The index is down 60 percent on the year.

At one point in the day, the market shed 15 percent before slightly rebounding. The drop was the biggest since 1987.

Europe's largest lender, HSBC, lost 14.77 percent to HK$75 - its lowest level in seven years, wiping $20 billion off its market value. The stock had just plunged 12.5 percent on Friday after Morgan Stanley slashed its target price to HK$75 on growing signs of trouble in emerging markets.

"There is panic selling in the market," said Kenny Tang, associate director at Tung Tai Securities. "Investors are still bracing for the bottom."

The losses came as Japan's Nikkei average fell 6.4 percent to its lowest point in 26 years as the surging yen will further weaken the nation's exports, hurting the economy. Banks tumbled on concerns that they will need to lift their capital.

"Banks are chronically under-capitalized, which means the credit-rationing process is still very much likely," said Tim Rocks, an equity strategist with Macquarie Securities, Hong Kong.

Expectations that the US Federal Reserve will further trim its key interest rates this week to more than four-year lows failed to calm investors.

ICBC, the world's largest bank by market value, slid 11.11 percent after it reported on Friday a slower pace of growth in third-quarter earnings and posted bigger-than-expected impairment losses on subprime mortgage-linked assets.

The China Enterprise Index of top locally listed mainland companies tumbled 14 percent to 4,990.08, following a drop in the mainland markets.

Energy stocks were among the day's biggest losers on worries that slowing growth on the mainland may cut demand for fuel.

Asia's largest oil and gas producer, PetroChina, fell 15 percent, while the region's biggest refiner, Sinopec Corp, gave up 16.44 percent.

Offshore oil specialist CNOOC slid 13 percent, while top coal miner China Shenhua Energy dropped 23.55 percent.

Mainland property developer Guangzhou R&F Properties tumbled 22.34 percent. The stock earlier tested a life low of HK$2.30 after a slew of support measures from the government to prop up the ailing sector failed to revive investor confidence. The company had shed more than a fourth of its market value by midday to stand at HK$3.52.

Bourse operator Hong Kong Exchanges & Clearing shrank 13.89 percent as dwindling turnover weighed on the company's earnings outlook.

"Nobody can tell for sure where the support levels are, or where the bottom is," said Castor Pang, a strategist with Sun Hung Kai Financial.

"The current bear market trends point to continuous declines in the market as fund managers unload their positions in the face of increased redemptions."

Aluminum Corp of China fell 12.5 percent after the world's No 3 alumina producer said on Sunday that its quarterly earnings plunged 92 percent, lagging forecasts, while its outlook was clouded by high costs and sliding aluminum prices.

Reuters

(HK Edition 10/28/2008 page2)