IT was a quiet week of range trading in Hong Kong with a thin volume, despite signs that foreign funds are streaming back to Asia. The week began with a strong prod from the United States, where the crippling budget crisis was resolved for the time being and the Dow Jones surged through the 5,000 mark for the first time. Locally stocks rallied as positive sentiment on interest rates prompted bargain hunters to snap up property and banking stocks. Brokers said the main reason for the rise was signs of progress in negotiations to balance the US budget, which meant the chances of a cut in interest rates had improved dramatically. The chairman of the Federal Reserve, Alan Greenspan, said last month that the formulation of a plan to reduce the budget deficit was a major pre-condition for further interest rate cuts. Dharmala Securities research director Ben Kwong said: 'Progress on the US budget dispute helped to improve market sentiment. Interest rate sensitive stocks, such as properties and banks, attracted most of the buying.' The announcement by China that it was taking serious steps to cut tariffs in order to gain acceptance to the World Trade Organisation was also seen as positive by the market. Dao Heng Securities research manager Mark Gallagher said: 'The market is regaining its composure but it is still hard to pick any strong patterns at the moment. 'There is no strong buy-China or buy-Hong Kong fund flow.' On Tuesday the influx of foreign funds helped the Hang Seng Index stage a technical rebound. Baring Securities sales director James Osborn said: 'It is all technical. The fundamentals have not changed.' But that happened to most other Asian markets as well, indicating foreign funds are starting to replenish some of their holdings in the region. Swire Pacific headed all stocks in net gain, adding $2 to $55.75. Asia Equity associate director John Hetherington said: 'Swire has been over-sold recently on the back of concerns over Cathay. Now the buyers are returning.' Towards the weekend a group of second and third-line stocks stole the attention of investors and dominated trading. Wall Street was closed on Thursday for Thanksgiving so there was no lead for the local market to follow. Without any guiding light and the weekend near at hand, most investors remained camped on the sidelines. Hongkong Telecom saw heavy buying this week. From a high point in June of $16.55 to a price as low as $11.90 on Tuesday, the stock has been oversold badly. Brokers said the gain was on rumours that Cable & Wireless might be the target of a hostile takeover bid.