HONG KONG - THE run on Hong Kong's Bank of East Asia subsided on Thursday, as banking authorities soothed savers' concerns that Wall Street's financial crisis had spread to the city.

Hundreds of customers queued for a second day across the city before branches opened as they scrambled to get their cash, after a rumour that it was overexposed to assets linked to Lehman Brothers and troubled insurer AIG.

But most queues had disappeared by the afternoon as the bank's management, the Hong Kong government and financial regulators dismissed the rumours.

BEA chairman David Li flew back from New York overnight to deal with the crisis and said he and other directors would buy up shares to show their confidence in the bank.

Hong Kong's richest tycoon Li Ka-shing also bought BEA shares with his personal money, a spokesman for Mr Li's flagship company Hutchison Whampoa said.

Both the Hong Kong Monetary Authority (HKMA), the city's de facto central bank, and Financial Secretary John Tsang said the city's banking system was safe and that BEA was in a strong position.

HKMA also injected 3.88 billion Hong Kong dollars (S$710 million) into the banking system on Thursday.

The move was as a result of 'increased liquidity demand... amid heightened concern about credit and liquidity conditions,' an HKMA spokeswoman told AFP.

The cumulative steps seemed to reassure the market, as BEA shares jumped 5.2 per cent in early trade, after falling 6.9 per cent on Wednesday. They ended the morning session up 2.8 per cent.

'I believe in the bank. These people are crazy,' said Mr Richard Wong, a manager at an electronics firm, as he walked past a queue outside one branch.

'They just do not have any knowledge about it. I have a lot of money in this bank but I will not be taking it out. They are just lower class people who do not understand the situation.'

But many savers remained wary and queues were seen outside several branches before the bank opened at 9.00am.

'I waited until 10 o'clock last night to try and get my money out, but could not get it, so I am back again to take it all out,' said construction worker Tanka Rai.

Mr Jose Varghese, a community organiser, decided to withdraw his savings after he walked past a branch in the Yau Ma Tei district and saw a queue of around 70 people.

'I was not intending to take out my cash and I am not worried about the bank, but it is better to be safe,' he said.

Crowds began to gather outside BEA branches on Wednesday, after text messages flashed across the city warning the bank was unstable as it held a large number of assets linked to Lehman's and AIG.

The bank called the messages 'malicious rumours' and said its financial position was 'sound and stable', but savers queued into the night to try to retrieve their funds.

In a statement, BEA said its exposure was 422.8 million Hong Kong dollars to Lehman's and 49.9 million dollars to AIG, out of consolidated assets of 396.6 billion Hong Kong dollars.

In Singapore, dozens of clients descended on the BEA office on Thursday after hearing the rumours.

Some told AFP they were there to withdraw their money, while others said they were contemplating their next move after getting assurances from bank staff and the city-state's central bank that the rumours were unfounded.

BEA is one of Hong Kong's most established banks and Mr Li is a member of a powerful city family, which has been prominent for five generations in business and politics. -- AFP

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