FRANTIC buying in the last 30 minutes of yesterday's trading pushed up the index by nearly 140 points to finish at 7,543. Dealers said the rally was due to buying on the futures market feeding through to underlying equities. Trading was around $4 billion, nearly double yesterday's volumes and the highest level in the past four days of trading. In earlier trading, the Hang Seng Index dropped by nearly 164 points to 7,365, its first fall below the 7,400 since August 1993. James Osborn, director of Baring Securities, said: 'Short covering by domestic investors sent the futures market up and the premium led to follow through in the underlying equities.' According to Mr Osborn, dealers who bet on further declines by selling Hang Seng Index futures decided to buy back the contract to cover their positions. 'This was a technical rally led by the futures market. We are looking at a spike in the futures market which is related to some heavy short covering. When the market saw the recovery, a lot of sellers ran for cover.' Mr Osborn said there was still widespread nervousness in the market about property and the prospect of rising interest rates and any rally was likely to peter out. Among the major property developers, Sun Hang Kai rose 60 cents to $48, adding nearly eight per cent to the Hang Seng. Great Eagle Holdings, the property investment company, which reported annual results after the market closed, recovered from a five per cent fall to finish the day 7.5 cents higher at $2.775. Hong Kong Land Development rose 30 cents to close at $14.28. Andrew Mathers, director of Morgan Grenfell Asia Securities, was more optimistic about immediate market prospects. Mr Mathers said: 'Sentiment is still bad. But many stocks have large discounts to asset values.' In addition to cheap stocks, the market was also buoyed by reports that United States firms in China were increasingly confident that they would not be caught in a trade war. He said the market had also largely discounted the impact of a possible rise in interest rates and there was increasing confidence in the resilience of the larger property stocks. Mr Mathers said: 'Other markets around the region have also taken a beating, making Hong Kong look more attractive. 'We could be anticipating a turnaround - but as for how long we do not know.' Stocks steadied at lunch time after tumbling by nearly three per cent during morning trading. Only a rebound in some real estate shares and the continued rise of Jardine group's Dairy Farm International helped stem the third big drop in as many days. Banks such as Hang Seng led the early morning decline while shares in many of the territory's biggest property developers, including Cheung Kong (Holdings) and Sung Hung Kai Properties, continued to slide. Sasson Securities's dealing director Michael Ng believes any rally will exhaust itself before week's end. Fears about an interest rate rise and the prospects for the property market should continue to batter share prices later this week. 'The market has been oversold in the past two days. A lot of United States firms - such as Salomon Brothers and Morgan Stanley - were also buyers.'
