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THE Hang Seng that raced past the 10,000-point barrier was a different animal last week as stocks rose strongly one day and languished the next.

   The index appeared to have lost direction, being held hostage to profit-taking and a rash of mixed signals on interest rates.

  Monday started well after a rally on Wall Street the previous Friday. The Dow Jones Industrial Average had jumped 37.93 points to 4,741.75, a strong recovery after several days of heavy losses.

  The news drove Hong Kong stocks up in the morning, with the index hitting a high for the day of 9,810.42 points.

   But it failed to hold on to its gains after strong third-quarter growth figures from the US reduced the likelihood of an interest rate cut. The index closed at 9,672.39, down 8.36 points.

  The figures showed the US economy grew a robust 4.2 per cent in the quarter, a figure which surprised the market.

   Monday's selling was also caused by arbitraging between the futures and cash markets because some brokerages had to open positions after October contracts expired.

   Tuesday was more lively with the index gaining 110 points, or 1.14 per cent, to close at 9,782.39.

   Buying was triggered by a strong US market overnight and bargain hunters were drawn into the market while the Dow continued its surge.

  Meanwhile, the real picture of economic growth in the US was far from clear.

  James Fitzgibbon, a vice-president of ING Capital Markets Inc in New York, said: 'This is a market that's not going anywhere because market opinion makers are split down the middle.

  'One camp says the economy is picking up and the other says 'That's nonsense'.'   Despite Tuesday's rally, the Hang Seng London Reference Index moved down 8.61 points to 9,782.39.

  On Thursday, Hong Kong stocks closed 33.03 points lower at 9,749.36 in thin trading on profit-taking.

  Friday was different. The market rose on hopes that US interest rates might be trimmed after all.

  The sudden change in sentiment came after comments on Thursday by the chairman of the US Federal Reserve, Alan Greenspan, who said interest rates would fall as long as Congress reached an accord to balance the budget. Investors liked the news and seemed to overlook the tough US action against Daiwa Bank.

  The Hang Seng ended the week up 106.44 points at 9,855.80. But to confuse the market further, figures released after the Hong Kong market closed on Friday showed US unemployment falling to a seven-month low of 5.5 per cent in October.

  The news dampened optimism of a rate cut and is likely to weigh on the local market tomorrow.



Mixed signals stir up confused Hang Seng