Sell-down begins as bird-flu fears rise

HONG KONG shares took a nasty double blow from the avian flu outbreak today after officials warned the disease may be spreading from human to human, while its geographic reach also showed no sign of letting up.

The new fears added greater momentum to a sell-down that began at the end of last week as the bug's possible impact started to register in the minds of analysts and investors.

Unsettled by the decidedly bearish turn of events, which may come to overshadow a vibrant local recovery, the Hang Seng index dropped 273.37 points to 13,016, a decline of 2%.

Today's drop was broad-based but led by stocks linked to travel, retail and tourism such as the de facto flag-carrier Cathay Pacific Airways. It plunged 45 cents or 3.2% to HK$13.80, well below recent highs above HK$15.

The chief worry was a statement from the World Health Organisation that two Vietnamese flu victims who died last month may have caught the disease from their brother, who also died.

If that proves to be correct, it would be the first time that avian flu has leapt from person to person, greatly raising its threat to populations worldwide, not just in Asia.

Previously bird flu had only been transmitted among poultry, and from poultry to a handful of human beings in direct contact with infected birds.

Official Chinese media, meanwhile, reported today that the bird flu had been detected right across the country, affecting 10 of China's 33 administration regions and provinces.

Brokers and investors are increasingly concerned that efforts to kill off infected flocks in the 10 countries now affected in Asia may not be enough to contain the virus.

Blue-chip retailer Esprit took a hit amid fears of falling sales, dropping 95 cents or 3.9% to HK$24.30.

Hotelier Shangri-La Asia slid 30 cents or 3.8% to HK$7.65 as investors guessed that the top-end chain may have fewer guests and lower profits.

The new health threat is dampening signs that Hong Kong's battered economy is on the mend, especially its vital property sector. Even as flu jitters took the upper hand today, Hong Kong Monetary Authority chief executive Joseph Yam said the number of homeowners with negative equity fell to 67,600 last December, down by more than a third since June.

The encouraging statistic was no help to developers, however. As the market slumped, Sun Hung Kai Properties dived 75 cents or 1% to HK$74.75, Cheung Kong HK$1.50 or 2% to HK$70.75 and Henderson Land Development 60 cents or 1.5% to HK$38.90.

Equities in Thailand also fell. The SET index, which has been under sustained pressure for a week because of the bug, eased 9.4 points or 1.3% to 689.5.

In was a slightly better story in Tokyo, where bargain-hunters dived into select stocks after a series of losses last week.

Carmakers led the risers' list, with added encouragement coming from above-expectation quarterly figures posted by Honda, which gained 80 yen or 1.8% to 4430. Nissan firmed 17 yen or 1.5% to 1146 and Toyota traded at 3560 yen, better by 100 yen or 2.9%.

The Nikkei 225 was static, falling 6.88 points to 10,776.73, a negligible move in percentage terms.

Equity markets in Singapore, Malaysia and Jakarta were closed for national holidays.