Market Rallies in Tokyo, Falls Again in Hong Kong

Japanese stocks shot up 4.9% Wednesday on government-directed buying by pension funds, though by midday today the rally appeared to weaken.

Meanwhile, the Hong Kong market early today continued to plunge, as investors fretted over the bitter war of words between China and Britain over political reform in Hong Kong.

Wednesday, Tokyo’s Nikkei index surged 785.35 points to 16,778.84, its largest one-day gain since late August.

Traders said government-directed pension-fund buying reassured investors and boosted short-covering and index-linked buying.

The market’s rise was especially strong because the news came when many investors believed that the market had fallen too quickly in recent days, traders said.

In midafternoon trading today, however, the Nikkei was up just 91.47 points to 16,870.31.

In Hong Kong, meanwhile, the Hang Seng index fell another 112.93 points to 5,735.40 early today, after losing 240.19 points Wednesday and 206.31 Tuesday.

“It’s almost a panic, it was ugly,” said Stuart Gregory, a trader with Morgan Grenfell. Analysts said that with little hope of an early resolution to the Sino-British dispute, there isn’t much chance of a recovery in the next few days.