Hong Kong Stocks Dive; Tokyo Rebounds

Hong Kong’s Hang Seng stock index plunged as much as 6.2% in early trading today as the government drew back from a two-week buying binge aimed at hurting speculators who were betting against the city’s stocks and currency.

Japan’s Nikkei-225 index rebounded from a 12-year low reached Friday, while South Korean stocks rose on government plans to stimulate the economy. But overall, stocks fell in Asia, including major indexes in Australia, Malaysia, Singapore, Taiwan, the Philippines and Indonesia.

The dollar weakened against major currencies, with traders blaming uncertainty about the duration of U.S stocks’ weakness. The Dow Jones industrial average fell 5.6% last week, along with most other world markets.

In Hong Kong, investors playing a cat-and-mouse game with the government bid stocks lower, betting that the Hong Kong Monetary Authority wouldn’t extend an unprecedented market intervention for a third week.

The market slump follows two weeks of government intervention targeted at people betting against the city’s stock market and its currency’s peg to the U.S. dollar. On Friday, Hong Kong bought almost $7.5 billion (U.S.) of stocks and said it will propose curbs on stock and futures trading.

It was the busiest day of trading in the exchange’s history.

Japanese stocks climbed early on a report that Sakura Bank will raise capital by issuing new shares to companies, including Toyota Motor Corp.

The benchmark Nikkei-225 index rose for the first time in four sessions, climbing 87.02, or 0.63%, to 14,002.65.

Meanwhile, silver fell in Tokyo on expectations that Russia, the world’s fourth-largest producer, will sell the metal to acquire foreign currency to help with its current financial crisis.

Silver for June 1999 delivery, the most active contract on the Tokyo Commodity Exchange, fell 3.2%, to 209.6 yen per 10 grams ($4.61 a troy ounce).

Silver had already fallen late Friday on the Comex division of the New York Mercantile Exchange to $4.695 an ounce, a 4.6% drop from the previous day.

A 34% decline in the ruble since Aug. 17 is making Russian products cheaper overseas and might spur exports of precious and base metals, traders and analysts said.