(Yicai Global) March 21 -- The Hang Seng Index, the Hong Kong stock exchange’s main benchmark, fell below 19,000 in intraday trading yesterday after Swiss banking giant UBS Group said it had agreed to buy embattled rival Credit Suisse Group for CHF3 billion (USD3.2 billion).

Despite the deal being announced before the start of trading in Asian markets, the Hang Seng Index fell as banking and financial stocks continued to decline and investors remained skeptical. It ended above 19,000, and had risen 1.4 percent to 19,265.61 as of 4.05 p.m. today.

Credit Suisse will operate as normal in Hong Kong, with clients able to deposit and withdraw funds from the lender's local branch and buy and sell stocks and derivatives through its trading services, the Hong Kong Monetary Authority announced yesterday.

But market insiders remain cautious. Credit Suisse has major financial flaws, which is a relatively serious situation, Sam Chi Yung, a strategist at Patrons Securities, told Yicai Global. Investors are concerned whether other financial institutions besides Credit Suisse are affected, he added.

The Credit Suisse incident has exposed the asset safety issue at listed financial companies, and there may still be a lot of undisclosed information, said Ronald Wan, non-executive chairman of Partners Capital International. 

European central banks continue to raise the cost of borrowing, and the US Federal Reserve will very likely to increase interest rates again this month, noted Xue Wei, an analyst at Ping An Securities' Hong Kong branch. The possibility that the crisis at European and North American banks will continue to evolve in the future cannot be entirely ruled out, Xue added.

We need to stay alert to violent fluctuations in the global financial sector represented by the European and American banking industries, Xue said.

The Fed has a lot of tools to manage the liquidity crisis, according to Zhou Hao, an analyst at Guotai Junan Securities, and it has yet to be seen whether the US economy will be dragged down by this latest crisis in the banking sector. Investors are becoming more pessimistic about the future, he said.

Editors: Shi Yi, Martin Kadiev