HONG KONG investors, fund managers and brokers have every excuse in the world to cry into their Carlsbergs this weekend. The territory was rife with omens and portents last week, all pointing to political upheaval, tumbling indexes, interest rate rises, and trade wars. Overhanging the market was the issue of China patriarch Deng Xiaoping's health. There was a time traders could panic the market by suggesting Mr Deng looked a little weary after his last triathlon. But now his family and senior politicians seem to be softening up the world for the announcement that Mr Deng is dead. Mr Deng has overseen China's transformation into the darling of emerging markets, and with the People's Liberation Army a fervent convert to the joys of capitalism, it seems unlikely Guangdong province is going to be turned into a giant collective farm once more. When he does die, the market, presumably, will not move and brokers will smirk and say they had already factored in the event. The Hang Seng looked weak yesterday afternoon - hovering near 7,300 - along with greater China's stock markets generally. Taiwan's benchmark index suffered its biggest fall in three months and Shanghai's index of A shares was down 12 points to 589.28 yesterday afternoon. Nervous investors seeking an excuse to sell the HSI need look no further than the latest headlines on the mainland leadership. But if they want further excuse to sell, there's plenty of raw material. Take interest rates, for example. The Hong Kong Association of Banks, always reluctant to rain on anyone's parade, decided against ruining Friday the 13th by raising the prime rate, but their hand might yet be forced by the Federal Reserve. In its periodic Beige Book report cards on Thursday, it warned the US economy was 'vibrant' - and if there is one thing the Fed hates more than parades, it is vibrant economies in which Joe and Jane Six-Pack have enough disposable income to go wild and spend up big at the local K-Mart. As a result, interest rates could well rise at the end of the month, and the HKAB reluctantly will have to pass the increase on while intoning: 'We feel your pain'. Mainland interest rates are unlikely to fall despite an inflation number last week of 25.5 per cent for December, down from 27.5 per cent in November. This figure, although positively deflationary by mainland standards, is not enough for central government to loosen the monetary strings, say officials. Trade war looms if talks on intellectual copyright do not have a happy ending. Washington continues to warn Beijing it will crack down and impose tariffs on about US$2.8 billion worth of mainland goods from early February unless Beijing does more to control illegal copying of US products. Beijing says it will crack down if Washington does, and has singled out Chrysler Corp and other US car-makers involved in China as being in the front line of fire. Mainland officials will meet US counterparts again today after the deadline for talks over copyright abuse by China was extended one day. Presumably the two sides will meet just long enough to hiss 'your parents met once and money changed hands' across the table before reporting back to their superiors that, sadly, the other side just would not listen to reason. If today's talks go the way of all flesh, then investors can prepare to see the Hang Seng Index plumb new depths. The territory's investment banks continue to emphasise the value of fresh blood, with enough blood transfusions to choke the entire cast of Interview With The Vampire . NatWest Markets reportedly has lost five staffers in the past six weeks. A defector from Merrill Lynch apparently has seen the error of his ways and is returning to the fold, and Lehman Brothers Asia chairman and chief executive, James Carbone is going to the group's asset management arm, to be replaced by Daniel Tyree, formerly of Lehman Brothers Europe. Rumours that Hong Kong's leading investment banks plan to buy revolving doors and replace their time clocks with visitor's books could not be confirmed at the time of going to press. One of the bright spots of the week was Asian currencies, which firmed again earlier this week as various central banks in the region dusted off their baseball bats and bolstered their currencies either by using swaps or by raising rates. Hong Kong's leading bank confirmed on Wednesday that it, too, was heart and soul in the fight against those speculating against Hong Kong's currency. Singapore bankers could have shown Hong Kong's bankers a thing or two about making money. The Lion Republic's open-handed financiers lived up to their philanthropic reputation in mid-week by offering to take depositors' money if they (depositors) made it worth (their) while. Under an arrangement which is unlikely to win the hearts of depositors across the world, depositors would have to pay a Singapore bank just over 0.1 per cent annual interest for the privilege of having the bank hold a 24-hour deposit denominated in Singapore dollars overnight. Banks were offering the negative 0.1250 per cent rate to depositors, but no transactions at that rate were recorded. The Who-Says-Business-Doesn't-Have-A-Heart Award goes to financial commentators who pointed out that every cloud - or shroud - has a silver lining. While it was tragic that so many people lost their lives in Kobe, analysts and brokers pointed out that Japanese insurers would probably be all right. Not only that, but the disaster could benefit electronics makers, building material companies, steel-makers, construction groups, commodity producers, shippers, the US-Japan trade balance and medical and pharmaceutical groups, while rebuilding alone could do something to redress the unemployment problem which Japan never had. China is waging war on phoney figures palmed off on the central government by local officials to impress superiors and win promotions, the official People's Dailysaid last week. The doctoring of official figures was so widespread it threatened to undermine China's understanding of its own society and economy, the newspaper quoted State Statistical Bureau officials as saying. 'As a matter of fact, figures have become the decisive factor in getting promotion in some areas,' an official told a meeting in the southern city of Haikou. 'And once you are promoted in this way, you tend to keep on reporting false figures,' the official added. It could not happen here, of course.
