By Graham Earnshaw
TOKYO, Oct 27, Reuter – The stock markets of Tokyo and Hong Kong broke out of the global downward spiral on Tuesday, rising in spite of further dramatic falls in New York and London.
The Tokyo market, the world’s largest, climbed 632.4 points to 22,834.96, recovering more than half of Monday’s 1,096.22 fall, and one broker said:
“Tokyo is now leading Wall Street. This market is preventing the domino-like fall in world stock markets.”
The Hong Kong market, which lost 33 per cent of its value in Monday’s panic-stricken sell-off, dropped a further 11 per cent after opening but quickly rebounded and at the end of the day had risen 156.05 points to 2,397.74, according to preliminary figures.
Hong Kong brokers said massive share purchases by big local investors, apparently including property tycoon Li Ka-shing, succeeded in pulling the volatile market out of its dive.
Just before the opening, the Hong Kong authorities also came out with a couple of announcements aimed at boosting confidence in the stock market, closed for four days last week due to fears of a collapse.
Leading Hong Kong banks cut their prime lending rate and the government said it would pump in more money to prop up the ailing stock futures market.
Tokyo brokers said rumours that the Finance Ministry had asked life-insurance companies and trust banks to buy shares had helped lift their market.
Hong Kong’s performance also helped Tokyo.
“The rebound in Hong Kong stocks cheered investors here,” said a broker at New Japan Securities. “The falls over the last week have caused a vacuum which is sucking in buyers.”
The Tokyo stock market has fallen least of all the world’s major markets and brokers said this underlying strength was at the heart of the Tuesday rise.
“With a little signal (of a rebound) in New York, Tokyo can take off,” said a foreign broker. “This market has got strength. It is the number one big liquidity market in the world.”
In Sydney, the key share index fell sharply yet again in spite of Tokyo’s and Hong Kong’s examples, shedding a further seven per cent of its value to end 91.9 points down at 1,323.1.
But some Sydney brokers said they detected some cause for optimism.
“We must have just about bottomed out and I wouldn’t be at all surprised to see upside movements after today’s performance,” said one broker.
On Monday, Wall Street suffered its second-worst points drop ever, with the Dow Jones Industrial Average losing 156.83 points to 1,793.93, just 55 above the close on “Black Monday” last week when the index fell 508 points.
Meanwhile, currency markets remained relatively steady but nervous in the face of the stock market turmoil. The U.S. dollar fell slightly to end in Tokyo at 142 yen and 1.77375 West German marks.
Dealers said the U.S. currency was weak, but they did not expect it to fall too far soon, largely because of fears of central-bank intervention if it approached the important 140 yen barrier.
Gold fell slightly to around 473.50 dollars an ounce. REUTER GAE MH