Hong Kong shares slump on subprime woes, key index ends at 4-month low

Hong Kong shares closed lower for a second day on Tuesday, with the Hang Seng Index posting its biggest single-day loss in a month, as investors fretted about the recurring subprime credit crisis in the United States and its impact on regional banks and other financials.

Concerns about investments in assets linked to the subprime mortgage market resurfaced this month after Lehman Brothers said Fannie Mae and Freddie Mac, the two biggest mortgage lenders in the United States, would need additional capital.

The U.S. Treasury also announced plans to rescue Fannie Mae and Freddie Mac, further fuelling fears that the subprime crisis may have intensified.

The federal government on Friday said it had taken over mortgage lender IndyMac Bancorp.

The Hang Seng Index lost 839.69 or 3.8 percent, its biggest loss since June 10, to end the session at 21,174.77. Today's closing level was the lowest since March 20.

A total of HK$65.79 billion worth of shares traded, up from Monday's $58.40 billion.

Aluminium Corp of China (Chalco) extended Monday's 4.4 percent decline and slumped 7.6 percent to HK$8.27 on worries higher power and other operating costs and a plan to cut output may dampen profits this year.

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