Jitters over renewed weakness in key benchmark levels in Hong Kong led a region-wide selloff Monday, as investors pummeled the Hang Seng down 1068 points, to 24,053 and Shanghai's exchange plunged 342 points, to 4419. The Nikkei also fared badly, losing 541 points, or 4%, to 13,087.
"On Friday punters took the market way up, but there was light institutional buying," says Bryan Watkins, a trader at Daiwa Securities in Hong Kong. "It was quiet on the trading floor. As those spreads got thinner people started to take the offers. Now the spreads are widening."
Other Asian market participants say the repeat selloff, which follows a steep decline in the Asian markets early last week, is a trend that is fast following the 1997 "Asian contagion," where the region suddenly went into a deep decline.
"It probably won't be as dramatic, but it's possible," says Andrew Clarke, a trader at SG Securities in Hong Kong. "Asia is better equipped to deal with it, but that doesn't mean it won't happen."
Market participants are divided on the direction of the Hang Seng now, which is considered a proxy for regional markets. The most bearish say the bottom may be 18,500 points, which they point out is consistent with the trend that seems to be mirroring the scenario 10 years ago.
Snowstorms in China grounded airline and oil stocks.
China Eastern Airlines(CEA Quote - Cramer on CEA - Stock Picks) plummeted 10%, to 15.62 yuan, while
Air China(AIRYY Quote - Cramer on AIRYY - Stock Picks) lost by the same percentage, to 21.73 yuan.
PetroChina(PTR Quote - Cramer on PTR - Stock Picks) dived 8.1%, to 24.02 yuan.
Other losers included
Sinopec Shanghai Petrochemical(SHL Quote - Cramer on SHL - Stock Picks), down 5%, at 13.22 yuan, and
Aluminum Corp of China(ACH Quote - Cramer on ACH - Stock Picks), off 10%, at 30.10 yuan.
In Hong Kong, financials were hit the hardest, and some dealers now say that
Hang Seng Bank(HSNGY Quote - Cramer on HSNGY - Stock Picks) is a favorite to short, since it still trades at 6.13 times book price vs. 1.6 times book price for parent
HSBC Holdings(HBC Quote - Cramer on HBC - Stock Picks). Hang Seng bank lost 2.2%, to HK$150.70, while HSBC Holdings fell 3.3%, to HK$116.50.
Insurer
Ping An(PIAIF Quote - Cramer on PIAIF - Stock Picks) slipped 6.9%, to HK$63.50, while market leader
China Life Insurance(LFC Quote - Cramer on LFC - Stock Picks) dropped 6.3%, to HK$31.40.
In Frankfurt, ADRs of technology stocks were tracking a decline in shares of
Alibaba.com(ALBCF Quote - Cramer on ALBCF - Stock Picks), which finished 5.6% lower, at HK$20.20.
Baidu.com(BIDU Quote - Cramer on BIDU - Stock Picks) was down 4.3%, while
Sina(SINA Quote - Cramer on SINA - Stock Picks) was shedding 7.7%, by midday.
"I wouldn't touch those tech shares with a bargepole -- I think you're insane if you do," says SocGen's Clarke. He says that if investors want to play anything tech-related, China Mobile is the best bet, although he cautions that the stock may fall further.
China Mobile(CHL Quote - Cramer on CHL - Stock Picks) dived 4.8%, to 117.10, while the smaller telco
China Telecom(CHA Quote - Cramer on CHA - Stock Picks) lost 4.9%, to HK$5.62.
China Unicom(CHU Quote - Cramer on CHU - Stock Picks) slipped 4.8%, to HK$17.20, but
China Netcom(CN Quote - Cramer on CN - Stock Picks) held up better, off 1.7%, at HK$23.90.
The declines in equity prices, prompted by fears over a U.S. slowdown, led the price of gold 0.6% higher, to $916 an ounce by the end of Asian trading.
In Japan, the yen surged vs. the dollar, to 106.44 vs. 107.61 on Friday. The currency sent exporters spiraling down, with
Nintendo(NTDOY Quote - Cramer on NTDOY - Stock Picks) the biggest loser, down 9.6%, to 47,000 yen.
Kobe Steel(KBSTY Quote - Cramer on KBSTY - Stock Picks) lost 5.7%, to 348 yen, and
Canon(CAJ Quote - Cramer on CAJ - Stock Picks) was off 4.9%, at 4620 yen.
Daniel M. Harrison
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