HK stock index slides more than 5 percent

Hong Kong's key stock index plunged over 5 percent Tuesday to its lowest point in nearly two years, joining a global market rout amid fears over the financial system after U.S. investment bank Lehman Brothers filed for bankruptcy.

The blue-chip Hang Seng Index tumbled 1,052.29 points, or 5.4 percent, to 18,300.61 as every company listed in the benchmark fell in the red. It was the stock measure's lowest close since October 2006.

"Today was a bloodbath," said Alex Tang, head of research at Core Pacific-Yamaichi, who noted that trading volume was its highest in months. "This was panic selling ... They are dumping shares, they just want to liquidate their positions."

The market's spiral came after the Dow Jones industrial average fell 504.48 points, or 4.42 percent, Monday _ the worst point drop since the first day of trading after the Sept. 11, 2001, terror attacks.

Investors reacted with alarm after a historic shakeup on Wall Street. Struggling with billions of dollars in losses, No. 4 investment bank Lehman Brothers Holdings Inc. said it would file for bankruptcy and Merrill Lynch & Co. agreed to be taken over by Bank of America.

The benchmark fell more than 6.5 percent in early trade. Mainland China's move on Monday to cut a key interest _ its first in more than six years _ appeared to have little effect on investor confidence.

"There must be some negative impact because U.S. investment banks have a lot of activities around the world, including this financial center in Hong Kong," said Joseph Yam, chief executive of the Hong Kong Monetary Authority, the territory's de facto central bank. "Given this severe crisis, there certainly will be some price fluctuations in the market. I hope everyone will manage the risk they take."

Virtually every sector suffered sharp declines Tuesday.

In financials, HSBC lost 3.4 percent to HK$118. Leading Chinese lender Industrial & Commercial Bank of China Ltd, or ICBC, plummeted 7.3 percent to HK$4.45, while China Construction Bank tanked 8.2 percent to HK$5.15

In telecoms, heavyweight China Mobile lost 6.1 percent to HK$71.65, hitting a new annual trading low. China Unicom plummeted 11.3 percent to HK$9.95.

Oil issues also were down as crude prices slide further. Upstream oil producer CNOOC Ltd. was down 8.6 percent to HK$8.56.

Foxconn International Holdings, the leading contract mobile phone maker and Motorola's primary contract manufacturer, shed 7.6 percent to HK$5.

On Tuesday, regulators announced they were restricting Lehman's trading activities, allowing the firm to deliver securities to clients for any trades in the last two days and to settle any outstanding futures positions with clients by day's end.

Lehman also said it was suspending trade in its warrants, a derivative product that allows investors to bet on the movement of securities and indexes. Whether some traders holding Lehman's warrants recouped any of their investment might hinge on the outcome of Lehman's bankruptcy case, said Peter Lai, investment manager at DBS Vickers.