HONG Kong's benchmark stock index plunged the most since the September 11, 2001, terrorist attacks, paced by Bank of China Ltd after BNP Paribas SA predicted the bank will write down overseas securities by US$4.8 billion.
Air China Ltd had its biggest decline on record after China Eastern Airlines Corp snubbed a bid to buy a stake. HSBC Holdings Plc dropped to a three-year-low on concern United States President George W. Bush's US$150 billion economic stimulus plan won't be enough to prevent the nation slipping into recession, according to Bloomberg News.
Yue Yuen Industrial (Holdings) Ltd, the world's largest maker of sports shoes for brands such as Nike Inc, fell after JPMorgan Chase & Co cut its rating to "neutral."
"The market is dominated by fear," said Ben Kwong, head of research at KGI Asia Ltd in Hong Kong.
The Hang Seng Index lost 1,383.01, or 5.5 percent, to close at 23,818.86, the most since September 12, 2001. The measure has fallen 25 percent since its October 30 peak of 31,638.22, more than the 20 percent level signifying an entry into a bear market.
The Hang Seng China Enterprises Index, which tracks "H shares" of Chinese companies, slipped 7.1 percent to 13,531.45, its steepest decline since May 10, 2004.
"If you look at the big picture, on the macro side, there aren't many positive signals," said Pauline Dan, who helps manage US$2.5 billion at Manulife Asset Management in Hong Kong. "I've been defensive since the fourth quarter and remain so."
Bank of China, which has the largest subprime-related holdings among Asian banks, declined 23 HK cents, or 6.4 percent, to HK$3.37 (46 US cents), its biggest drop since November 5. Industrial and Commercial Bank of China Ltd, the nation's biggest bank by value, fell 41 HK cents, or 7.8 percent, to HK$4.86, the steepest loss since its October 2006 debut.
"That BOC only provisioned US$473 million for US$7.95 billion subprime exposure is far from comforting," Dorris Chen, an analyst at BNP Paribas, wrote in last Friday's note. Bank of China may write down 17.5 billion yuan (US$2.4 billion) for the fourth quarter of 2007, and an equal amount for this year, she said.
Air China, the nation's largest carrier by market value, slumped HK$1.50, or 15 percent, to HK$8.38, the steepest drop since its December 2004 debut. China Eastern, the country's third-biggest carrier, was suspended from trading. The stock climbed 40 cents, or 6.3 percent, to HK$6.73 last Friday.
China Eastern said it "doubted the sincerity" of an offer from an Air China affiliate to buy as much as 30 percent for at least HK$14.9 billion (US$1.9 billion).
China Eastern's opposition may frustrate Beijing-based Air China's attempts to set up a hub in Shanghai and a dominant position in Asia's biggest aviation market.