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Hong Kong stock market is on the rebound

A rebound in Hong Kong's stock market could not convince investors worldwide that Asia's economic problems are over, as U.S. stocks dropped and European markets gave up most of their early gains while most of Asia's markets fell.

The Dow Jones industrial average, Wall Street's most watched indicator, dropped 90.37 points to 7,757.40 in late morning trading after jumping 92 points to start the day on enthusiasm about the turnaround in Hong Kong's market.But investors grew uncertain about Hong Kong's future in light of forecasts for a long-term slowdown in the country's influential property market, renewed speculative attacks on its currency and continued high interest rates.

That could mean an overall slowdown of Hong Kong's vibrant economy, although no one is sure how much.

"I wouldn't rule out that the Hong Kong share market will never again see the high of three months ago," said independent investment analyst Marc Faber.

The blue-chip Hang Seng index ended the day at 11,144.34 points, up 718.04 or 6.88 percent, as investors shopped for shares cheapened by the market's 10-percent plunge Thursday. It was Hong Kong's second-biggest plunge since the global 1987 crash.

The surge helped Tokyo's stock market recover. But the Dow industrials, an index of 30 multinational companies whose profits already have been pinched by the mounting economic turmoil in Southeast Asia, retreated as European markets turned mixed.

Stocks in London finished lower after a morning rally fizzled in the late afternoon. The Financial Times-Stock Exchange 100-share index closed with a loss of 21.3 points, or 0.4 percent, at 4,970.2 on Europe's biggest market. The index peaked during the day at 5,103.2, a gain of 111.7 points.

In Paris, the CAC 40 index also closed with a small loss. Frankfurt's DAX index closed with a gain of 1.9 percent, but its close came before other markets started turning lower in the afternoon.

Confidence in Hong Kong was boosted by talk that local tycoons were buying shares in their companies, investments were flowing in from China and even a government-backed fund was buying.

Small-time investors crowded around public screens to watch the market moves but showed no signs of panic. Many said they planned to hold on to their shares until prices rebound.

Others noted that Thursday's crash followed a year of giddy rises past the 16,000 mark, which some economists had said was excessive. The market had been in the 12,000 range one year ago, not dramatically higher than Friday's final 11,144.34 level.

Newspapers forecast tougher times for mortgage payers, restaurants and the luxury car market because of higher interest rates.

"It doesn't have the same feel as the '87 crash," said Colin Bradbury, director of securities at Jardine Fleming. He said people were less worried about the stock market than the stability of Hong Kong's currency, which the government said had come under speculative attack.

It was the government's efforts to beat back the speculators that forced higher interest rates, and in turn triggered the stock sell-off.