Why Hong Kong Struck a Nerve

The plunge in the Hong Kong stock market this week--triggered by the perceived threat of currency devaluation there--has had a deeper global impact than the earlier crises in other Asian markets, because Hong Kong is the region’s largest market, excluding Japan. What’s more, many investors are worried about the potential response of Hong Kong’s new Chinese rulers--especially President Jiang Zemin, to whom Hong Kong Chief Executive Tung Chee-hwa answers. Experts also predict a major decline in Hong Kong’s real estate prices, which would compound the region’s financial woes.

Asia’s No. 1 market, excluding Japan . . .

Market Capitalization, in U.S. billions, as of June 30

Hong Kong: $427

Taiwan: $346

Malaysia: $282

India: $159

South Korea: $157

Singapore: $135

Indonesia: $111

Philippines: $74

Thailand: $60

. . . is now falling with the rest

Year-to-date change in main market stock indexes, measured in local currencies

Taiwan: +13%

South Korea: --7%

Indonesia: --22%

Hong Kong: --23%

Singapore: --26%

Thailand: --38%

Philippines: --42%

Malaysia: --43%

Source: Bloomberg News