The Hong Kong stock market has finished lower now in back-to-back sessions, shedding nearly 900 points or 6 percent along the way. The Hang Seng Index crashed through support at 15,000 points, although investors are optimistic that the market may begin a modest recovery at the opening of trade on Thursday.
The global forecast for the Asian markets is mixed with a touch of downside, thanks to a series of disappointing quarterly reports. Financials are expected to remain under pressure, although some of the bigger exporters and technology stocks may provide support. The European stock markets finished sharply higher and the U.S. markets ended mostly lower - and the Asian markets are predicted to see equal dichotomy.
The Hang Seng finished sharply lower on Wednesday, dragged to the downside by weakness among the financials and the property stocks.
For the day, the index dropped 407.44 points or 2.67 percent to close at 14,878.45 after trading between 14,830.59 and 15,396.28 on turnover of 67.861 billion Hong Kong dollars.
Among the decliners, HSBC Holdings slid 1.72 percent, while SOHO China fell 0.85 percent, Sun Hung Kai Properties was down 3.22 percent, Cheung Kong eased 2.26 percent, Hutchison Whampoa lost 2.54 percent, Hopson Development Holdings plummeted 6.10 percent, Henderson Land Development dropped 4.62 percent, Agile Property Holdings fell 2.99 percent, China Eastern Airlines lost 4.05 percent, Cathay Pacific Airways was down 0.45 percent, China Mobile shed 2.76 percent and China Unicom eased 2.50 percent. Finishing higher, China Telecom was up 0.57 percent and Air China was up 3.98 percent.
The lead from Wall Street is modest pessimism as stocks experienced considerable volatility over the course of the trading day on Wednesday, with the major averages unable to sustain any significant moves. The choppy trading came as investors continued to digest mixed earnings news.
Early on in the session, traders reacted negatively to quarterly results from Morgan Stanley (MS), which became one of the few major financial companies to report weaker than expected first quarter results. Morgan Stanley reported a much wider than expected first quarter loss of $0.57 per share and revealed that it has slashed its quarterly dividend by 80 percent to $0.05 a share.
Separately, Boeing (BA) reported first quarter net income of $610 million, down 50 percent from last year quarter's $1.21 billion. Revenues for the quarter rose 3 percent to $16.5 billion from last year's $15.99 billion. Looking forward, the aerospace giant reaffirmed its full year revenue guidance but lowered its earnings guidance due to lower earnings at its commercial airplanes business.
Meanwhile, fast food giant McDonald's (MCD) reported first quarter net income of $0.87 per share, compared to $0.81 per share in the same quarter of last year, while analysts expected the company to report earnings of $0.82 per share.
In other news, Treasury Secretary Timothy Geithner spoke to the Economics Club of Washington earlier in the day, hinting that policymakers might be forced to alter their recovery strategies as the global financial crisis drags on. He explained that the revised estimate from the International Monetary Fund for global growth could spark a change in policy. The IMF lowered its 2009 outlook, now predicating a contraction of 1.3 percent for the year compared to its previous estimate of 0.5 percent growth.
The major averages pulled back sharply going into the close, with the Dow and the S&P 500 falling firmly into negative territory. While the NASDAQ managed to hold onto a modest gain, closing up 2.27 points or 0.1 percent at 1,646.12, the Dow closed down 82.99 points or 1.0 percent at 7,886.57 and the S&P 500 closed down 6.53 points or 0.8 percent at 843.55.
In economic news, Hong Kong will on Thursday announce consumer price numbers for March, with forecasts calling for an increase of 1.2 percent on year - up from the 0.8 percent annual expansion in February.
On the corporate front, the Court of Appeal has overturned the judgment of the High Court of Hong Kong to sanction the Scheme of Arrangement to take PCCW private in a transaction valued at more than $2 billion. Hong Kong's Securities and Futures Commission, which has opposed the deal, stated recently that it would seek clarifications in relation to the splitting of shares.
PCCW's chairman, Richard Li, through his company Pacific Century Regional Developments and China Netcom, a part of China Unicom, in last November offered to buy out minority shareholders of PCCW for HK$4.20 per share and a month later sweetened the offer to HK$4.50 per share.
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