Hong Kong dive rocks markets

It was the fifth-worst point drop in the Dow's history, though not even close to the largest percentage drop.

"Nobody knows which way to go," said Tatsuya Enomoto, chief foreign exchange dealer at Sumitomo Bank Ltd. in New York.

In Hong Kong, which analysts had believed was immune from the financial turmoil roiling the rest of Southeast Asia, the Hang Seng index of blue-chip stocks dropped 10 percent for the day, a plunge of 1,211.47 points to 10,426.30.

It now is down 23 percent the week, following major meltdowns across Asian stock and currency markets that began this summer.

In the fallout of the assault on stocks in Hong Kong - a bastion of capitalism in Asia despite China's takeover in July - major stock indexes fell more than 3 percent in Japan, Britain, France and Germany. Shares were off more than 5 percent in Mexico and down more than 8 percent in Brazil.

In the United States, the Dow Jones industrial average tumbled 229 points at one point, or by 2.9 percent. But Wall Street's best-known indicator recovered some lost ground, still closing down 186.88, or 2.3 percent, at 7,847.77.

The shock came just days after the 10th anniversary of the Oct. 19, 1987, crash that sent the Dow plummeting 508 points, or nearly 23 percent. But even with Thursday's loss, the average still is up almost 22 percent this year.

Gerald Gorman, a retired editor watching the ticker at a Fidelity Investments office in New York yesterday afternoon, was hoping for a larger sell-off so he could buy some of his favorite stocks more cheaply.

"Even 1987 didn't unnerve me," he said. "In fact, I did some buying then. It would have to be an extreme drop of several hundred points, accompanied by social disaster. It would have to be really apocalyptic."

If there was a winner yesterday, it was the U.S. bond market, which soared on the turmoil.

U.S. Treasury bonds and bills, the most liquid and secure of investments, were snapped up by global investors looking for a haven for the money yanked out of stocks.

Yields on the 30-year U.S. Treasury bond, an important indicator of the cost of borrowing, plunged to 6.30 percent by late yesterday from 6.42 percent late Wednesday.

The rout in Hong Kong occurred after the government, in a move to support its currency, began aggressively selling U.S. dollars and buying Hong Kong dollars. It also cut off a cheap source of credit for banks.

Interest rates soared. The interest on overnight loans between banks shot up to 300 percent from 7 percent Wednesday, sparking fears that banks will raise their prime lending rates today, undermining Hong Kong businesses and the real estate market.

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