International stock markets are set for more shaky trading next week, after the US stock market fell again on renewed nervousness about developments in Asia. An early recovery on international markets fizzled out yesterday, and last night the Dow Jones index of US shares closed 1.7 per cent lower, following Thursday's 2.33 per cent drop.
The shares of US technology companies fell sharply late yesterday on fears that the Asian markets crisis would hit their business. Investors fear that the market upheaval will hit growth in Japan and other Asian markets, thus denting demand for the products of the big US technology companies.
Earlier, the international markets appeared to have stabilised, after Hong Kong staged a recovery. The Hang Seng index of stocks climbed 6.89 per cent, appearing to demonstrate that Hong Kong may be, as it has always claimed, different from the lessstable economies of south-east Asia.
Yesterday's gains followed the Hong Kong market's 10 per cent plunge on Thursday, which had shattered the confidence of investors and pulled down share prices across the globe.
The partial recuperation of losses means that the former British colony has survived its first serious crisis since it became a Special Administrative Region (SAR) of China in July.
The administration of the chief executive, Mr Tung Chee-hwa, is being credited with keeping cool and resisting pressure to break the Hong Kong dollar's 14-year-old link with the US dollar.
The Financial Secretary, Mr Donald Tsang, succeeded in forcing speculators to back off at the end of a week when the rush of capital out of the Asia-Pacific region finally hit Hong Kong. He did so by raising interest rates precipitately and making absolutely clear the SAR`s determination to maintain the rate of 7.8 Hong Kong dollars to one US dollar.
Brokers in Hong Kong said they were still uncertain about the near-term direction of the market. "The market can't discount all this [currency uncertainty] in one day," said an analyst, Mr Kelvin Tang, at Impact Asset Management.
This concern about the outlook for Hong Kong and other Asian equity and currency markets was reflected in a day of nervous trading in Europe and the US.
After initial rallies in the wake of Hong Kong's overnight gains, European markets started to slide in later trading in response to weakness on Wall Street. In London the FTSE 100 index dropped 21.3 points to 4970.2. The Dublin market ended just slightly lower, but any further falls in international markets are bound to feed through to Irish shares.
International investors will now be watching the performance of the Hong Kong and other Asian markets on Monday, to see if further losses are in prospect.
Analysts in Hong Kong said that Friday's rally was prompted by factors which could reverse at any time. Major institutional investors continued to sell stock and the recovery had been mainly due to companies buying back their own shares.