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HK stocks close sharply lower on Wall Street

HONG KONG: Hong Kong stocks nosedived on Monday as strong US economic growth data fuelled fears the US Federal Reserve would move aggressively to choke inflation.

The benchmark Hang Seng Index ended down 653.60 points or 4.04 percent at 15,532.34. Turnover was HK$16.33 billion, compared with HK$20.73 billion on Friday. Traders said the fall was not surprising given substantial losses on Wall Street on Friday, where the Dow industrials fell 289.15 points or 2.62 percent to 10,738.87 on interest rate jitters, its seventh biggest point fall.

"It just reflects the US market. It fell out of bed," said Capital Securities (HK) assistant sales director Peggy Ho.

South China Securities director Howard Gorges said he suspected the market's fall reflected expectations of another overnight sell-off on Wall Street.

Traders said the market had already been vulnerable to a correction after gaining 1,077.53 points or 7.13 percent last week. Traders and analysts said they saw virtually no prospect for a traditional rally ahead of Chinese New Year this weekend, tipping further losses.

The Federal Open Market Committee (FOMC) meets on Tuesday and Wednesday and is expected to raise short-term interest rates by 25 basis points, sparking a matching rise in the discount window base rate in Hong Kong where the currency is pegged to the US dollar.

Mansion House research head Stanley Ng said the Hong Kong market had been harder hit than most Asian markets.

Ho said some smaller stocks and technology stocks weathered the sell-off better, with the heavy capitalisation index stocks taking the biggest pounding.

Declines outpaced advances by 434 to 257, with 225 issues unchanged in the broader market.

Market heavyweight China Telecom (Hong Kong) Ltd, often used as a proxy for the benchmark index, was down HK$4.15 or 7.94 percent at HK$48.10 on turnover of HK$1.02 billion.

It contributed 257.52 index points to the total losses, according to Reuters 3000.-Reuters