A BUMPY ride is expected ahead as interest rate speculation grows, political turmoil over budgets in the United States intensifies and overseas investors continue to cut and run.
Speculation and uncertainty in foreign exchange markets will do nothing for investor confidence either, as the Mexican peso gets sold and the United States dollar looks unsteady over debt default worries.
Interest rate speculation will reach a crescendo on Wednesday, when the Federal Open Market Committee in the United States meets to consider monetary policy and interest rates. The consensus at the weekend in financial news reports and straw polls in North America was for the Fed to leave rates unchanged.
Upside looks pretty limited this week, barring an interest rate cut. Should a cut come then a rise to 9,800 on the Hang Seng index is in view. No interest rate cut and a darkening in storm clouds in capital markets overseas will see the index almost definitely hit 9,200. A test of 9,000 is also in sight should there be no easing of the bad news coming from overseas.
In Hong Kong, the chances of a traditional year-end rally are looking slimmer the whole time. Stock market fundamentals appear to be deteriorating as the property market shows no signs of a pick-up and domestic private consumption growth is slow.
In property, there are reports of secondary market activity picking up, but to date this is not being taken as a firm signal of a recovery.
Last week, the stock market lost ground in heavy cash and futures trading. The Hang Seng index fell 4.5 per cent to 9,411.85. The November future slumped 25 points to 9,395, down 4.7 per cent on the week.
