VZCZCXRO5436
RR RUEHCHI RUEHCN RUEHDT RUEHGH RUEHHM RUEHNH RUEHVC
DE RUEHHK #1983 3011005
ZNR UUUUU ZZH
R 271005Z OCT 08
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC 6113
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS HONG KONG 001983 
 
SIPDIS 
 
STATE FOR EAP/CM AND EEB/OMA, TREASURY FOR OASIA 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ETRD HK CH
SUBJECT: Hang Seng Plummets 12.7 percent, Largest Drop Since 1989 
 
¶1.  The Hang Seng Index plummeted as much as 15 percent to a low of 
10,685 before recovering slightly to finish the day down 1602.54 
points, or 12.7 percent, at 11,015.84.  This marked the largest 
single-day drop since the Tiananmen Incident in 1989.  No one was 
spared, but Chinese corporate stocks in every sector took the worst 
beating.  ICBC fell 11 percent, Aluminum Corp of China (Chalco) 
dropped 20 percent and Citic Pacific plunged 24 percent as investors 
sought help from Hong Kong Legislative Council members to claim 
compensation for that company's US$2 billion loss on currency 
derivatives.  HSBC shares were also down sharply.  Analysts said 
that wide-spread pessimism about an economic recovery, combined with 
the slide in Japan's Nikkei, dropping NYSE futures markets, and 
worse than predicted profit announcements by ICBC and Chalco, drove 
the market down. 
 
¶2. Interbank liquidity tightened for overnight and borrowing 
exceeding one month.  HIBOR on Monday, October 27, rose to 1 percent 
for overnight, 2 percent for one week, 2.75 percent for two weeks, 
3.8 percent for one month, 4.05 percent for two months, 4.15 percent 
for three and six month borrowing and 4.1 percent for 12 month 
loans.  That compares to 0.8 percent for overnight loans and 3.6 
percent for one, two, three and six month borrowing on Friday. 
 
¶3.  A better than expected Hong Kong trade report could not reverse 
the slide in equities.  September exports increased 3.6 percent, up 
from a 1.9 percent increase in August.  But third quarter exports 
fell by 5.7 percent compared to last year.  Exports of machinery and 
electronics to China and the region were down, suggesting further 
slowing of trade in the months ahead.  Imports for the month were up 
3.9 percent, up from August's 1.5 percent growth.