Cablegate: Hang Seng Bounces 14.35 Percent, Regains Monday's Losses

VZCZCXRO6473
RR RUEHCHI RUEHCN RUEHDT RUEHGH RUEHHM RUEHNH RUEHVC
DE RUEHHK #1991 3021039
ZNR UUUUU ZZH
R 281039Z OCT 08
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC 6125
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS HONG KONG 001991

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 Bounces 14.35 percent, Regains Monday's Losses
and More

1. A day after the biggest single day drop in the Hang Seng Index
since 1989, the Index regained all of what it had lost on Monday and
more. By the end of Tuesday trading, the Hang Seng Index was up
14.35 percent to 12,596, a gain of 1580 points, the largest one day
gain since 1997. Volume was higher than recent norms at almost HKD
85 billion. A big loser on Monday, HSBC led the rebound, gaining 20
percent from yesterday. Even Band of East Asia (BEA), which issued
a profit warning early in the day, saw its shares rise. Banking
stocks across the board performed well with ICBC up 16 percent, Bank
of Communication up 23 percent, and Bank of China up 22 percent.
Chinese property companies were the only shares that continued to
trade lower. Sinoland fell 1 percent while China Overseas Land
Investment dropped 10 percent.

2. Local analysts were skeptical about the prospect for additional
gains. Wild swings have become the norm in recent days, and many
expected today's gains to be given back in short order. Chinese
Premier Wen Jia-bao, on a visit to Russia, told the press that China
had confidence in Hong Kong's economic fundamentals and would
support the Special Administrative Region during the global
financial crisis. Financial Secretary John Tsang told reporters
that the government "has a set of measures ready and will act if
needed", but he also warned that the market would continue to be
volatile.

3. Interbank liquidity loosened considerably for all tenures. HIBOR
on Tuesday, October 28 was 0.6 for over night, down from 1 percent
on Monday; 1.25 percent for one week, down from 2 percent; 2.5
percent for two weeks, down from 2.75 percent, 3.25 percent for one
month, down from 3.8 percent; 3.6 percent for two months, down from
4.05 percent; and 3.85 percent for three, six, and twelve month
borrowing, down from 4.15 percent for three and six month borrowing
and 4.1 percent for 12 month loans on Monday.

Roach, Fung, Davies, Lau head Economic Task Force

4. Hong Kong Chief Executive Donald Tsang announced the creation of
a high-level economic task force to monitor and assess the impact of
the global financial crisis on the Hong Kong economy. The task
force will be chaired by Tsang and consist of ten members, including
Morgan Stanley Asia Chairman Stephen Roach, Standard Chartered
Executive Director Mervyn Davies, Chinese University of Hong Kong
Vice Chancellor Lawrence Lau and local tycoon Victor Fung. The move
fulfills one pledge in the Chief Executive's recent policy address
and will advise the government on ways to overcome the financial
crisis and promote new business opportunities in Hong Kong.

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