Analysts advise caution
INVESTORS should remain on the sidelines this week as the Sino-British political debate heats up ahead of the Legislative Council's viewing of the Governor, Mr Chris Patten's, democratic reform package later this month.
Expected low volume this week could contribute to market volatility, brokers said, adding that investors were likely to focus on new issues Kosonic, Denway Investments and Tackhsin.
For the week, the Hang Seng Index fell four points to close out the week at 5,747.21 with volume declining 25 per cent to $2.08 billion.
''Last week, the market continued to make heavy weather towards 6,000 level. Trading activity was subdued as the market was preoccupied with the cholesterol content of the Governor's diet,'' said Standard Chartered Securities research head Mr Edward Chan.
''High-ranking Chinese officials gathered in Guangzhou with Hongkong advisers and businessmen will lead to lots of speculation . . . so investors are likely to remain on the sidelines this week.'' Speculation that the Governor would not stay in Hongkong until 1997 and further expected attacks from Beijing, following consultations at the weekend, should keep trading activity subdued, but amplify share price volatility, brokers said.
''Unless political uncertainty gets out of the way, it's unlikely that the market will surge in the short-term,'' said Ms Amy Chan, vice-president of Nomura International (HK).
''There's lots of interest in the new issues, such as Denway Investments, but I think the local market will drift. Unless volume picks up, I don't see it passing the 5,900 mark.'' New public offers Tackhsin and Denway Investments are expected to steal the show this week, with some analysts predicting Tackhsin to be oversubscribed 552 times and Denway Investments even higher.
Traders do not believe the index will test the 5,900 level with some predicting that it will hover around the 5,500-5,600 mark.
Last week's land auction in which World International paid $3.53 billion for a residential plot at Diamond Hill, was slightly below market expectations of $4 billion, analysts said.
But many remain confident about the Hongkong property market, despite the Financial Secretary Mr Hamish Macleod's refusal to lift the 70-per cent mortgage lending rate.
''The Financial Secretary said that if real estate developers could find a way to provide better mortgage packages to first-time buyers, he would consider a way to carry that out,'' Mr Chan said.
Nevertheless, analysts believe property counters will under-perform the market, while banking and utilities counters will fare better.