Correction could strip 1,000 points off index
The Hang Seng Index could slide as much as 1,000 points today as jittery investors sell stocks after markets in the US and Europe slumped on fears that economic growth is weakening, fund managers say.
'Hong Kong's American depositary receipts fell about 3 to 8 per cent last Friday in the US, so I expect the Hang Seng Index may fall to 28,500 points,' said Michael Wong, research director of Hantec Investment International.
Fund managers said the market was bracing for a plunge today after having the weekend to digest the news from the US. Analysts also said it was time the market consolidated after sharp gains in recent weeks.
The Hang Seng Index closed up 166.34 points on Thursday at 29,465.05 after briefly breaching the 30,000-point mark for the first time. The market was closed on Friday.
The Dow Jones Industrial Average fell 366.94 points, or 2.64 per cent, on Friday, while the Nasdaq dropped 2.65 per cent. American depository receipts of PetroChina fell 7 per cent in New York, while China Mobile's fell about 4 per cent and HSBC's fell 2.99 per cent.
'The Hang Seng Index may fall at least 600 to 700 points,' Ben Kwong Man-bun, the chief operating officer at KGI Securities, said. 'A significant correction is healthy to the stock market because upward momentum still exists.'
The index has risen 10,000 points, or more than 40 per cent, in the nine weeks since Beijing announced a plan to allow individual mainland investors to buy shares in Hong Kong. Mr Kwong said the Hang Seng Index may fall to as low as 26,000 in the next month due to profit-taking by fund managers before it rebounds.
A Morgan Stanley report last week said fair value of the index was 24,000 points and the benchmark should hit that level within three months.
G7 finance ministers sounded a bearish note, saying global economic growth would slow on a weak US housing market, high oil prices and turbulent financial markets.
In the past nine weeks the Hang Seng Index has added 10,000 points, a gain of more than 40%