Major markets in Asia lost ground on profit taking, despite a short-lived rally early in the week. The possibility that a U.S. led war on Iraq could break out as early as next week led markets lower on Friday.
Hong Kong's main share index ended the week below 9,000, its lowest level since October of last year. Analysts say investors were cashing in their winnings after the market followed Wall Street to a small recovery last week. On Wednesday, the market reacted negatively to the territory's budget presentation, which revealed that Hong Kong residents will face higher property and salary taxes.
Derek Cheung, an analyst with HSBC investment bank, says the impact of higher taxes will be seen in the stock market, not in the economy.
"Most of the people are still paying below eight percent salaries tax. So in terms of impact on their purchasing power, it does not make a big difference," he said. "In terms of impact to the [stock] market, yes, no doubt whenever we see a tax hike it is negative. But I would say the negative impact [on the overall economy] is not going to be very significant."
Hong Kong's main air carrier, Cathay Pacific, lost nearly four percent for the week, despite revealing a six-fold jump in 2002 earnings on Wednesday. Investment bank UBS Warburg downgraded the stock from "buy" to "neutral," saying the airline's cost-saving measures would not be enough to offset higher fuel prices during the current year.
Hong Kong's Hang Seng index lost 2.3 percent during the week, closing at 8,907.
All other Asian markets were also pushed lower after President Bush's statement that Washington does not need U.N. approval to attack Iraq.
Japan's Nikkei 225 lost 2.5 percent this week, ending at 8,144, a new 20-year low.
In South Korea, the Central Bank cut its economic forecast for the second time in as many months. The bank's governor said the economy would expand by just five percent this year, compared to earlier predictions of 5.7 percent.
Seoul's Kospi index lost five percent during the week to close at 546.
Despite a terror attack at an airport in the Southern Philippine city of Davao, the country's stock exchange composite index escaped major losses this week. It closed on just five points lower, to end the week at 1,014.
