A TECHNICAL correction and profit-taking saw the Hang Seng Index close the week down 255.3 points at 9,541.87, a drop of 2.61 per cent, as hopes of an interest rate cut in the United States faded.
Vague remarks by the US Federal Reserve chairman Alan Greenspan when he testified before the Senate Banking Committee about improved prospects of economic growth took a toll on the Dow Jones industrial average, which slumped 37 points in early trading on Friday. The Dow later recovered to close down 3.25 points.
There are growing doubts over whether the Fed's Open Market Committee (FOMC) will announce a rate cut at its meeting on Tuesday.
Brokers said last week's performance was a technical correction after a rally lasting four weeks.
'It was quite expected, after the highs from last week,' Dharmala Securities research director Ben Kwong said.
'The market has been over-bought, and investors were looking for excuses to take profit.' On Monday, there was strong buying in Hutchison Whampoa, triggered by rumours that it was about to float its mobile telephone network Orange on the London stock exchange.
The utilities sector was hit hardest, with a disappointing day for Hongkong Telecom which fell 25 cents to $14.10, after a rumour that CITIC Pacific would sell part of its stake in Telecom to fund its Tamar Basin site project.