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SCMP Reporter

STOCKS weathered a round of profit taking yesterday morning before confidence returned in the shape of foreign funds in the afternoon.

  This enabled the market to retrace all of its early losses and edge into positive territory just before the close.

  The resilience of the market despite the early caution cheered most brokers and many are looking for further gains ahead.

  The Hang Seng Index closed 1.89 points up at 10,957.22, a gain of 0.02 per cent.

  Turnover was buoyant at $6.99 billion, down from the revised $8.71 billion for Monday. Volume was solid with 3.01 billion shares changing hands.

  Andrew Fernow, research director at Vickers Ballas Securities Hong Kong, said: 'The market showed remarkable resilience today.

  'The profit taking in the morning was partly due to psychological resistance about the 11,000 level but the inflow of funds later was able to create good relative strength.

  'The market leaders will probably resume their uptrend.'   Brokers said the reasons for the market's change of heart included both global and local factors.

  The continuing high volume of funds from America and Europe was seen as the major reason for the continuing rally. Late fund flows are usually attributed to European buying.

  The better than expected inflation report for December also was seen as triggering buying in the afternoon.

  Consumer Price Index A, the broadest measure of inflation, fell to 6.6 per cent, its lowest level in nearly two years.

  The absence of placement activity has also given support to the market.

  Howard Gorges, managing director of South China Brokerage, said: 'These intra-day corrections are very symptomatic of a bull market.'   The index began with a tumble, falling from the previous close of 10,955.33 to sink below 10,880 after 30 minutes trading.

  After a brief pause, selling pressure took it down again to reach the day's low level of 10,857.23 around 11.45am.

  It reached lunch at 10,878.84, an intra-day fall of 76.49 points.

  Stocks surged in the afternoon with the index finishing just off the day's high of 10,988.66.

  The major blue chips were mixed. Among the 33 Hang Seng Index constituents, 15 advanced, three closed unchanged and 15 went backwards.

  Property stocks were the strongest on the day with the Hang Seng property sub-index climbing 158.87 points up at 19,609.33.

  Cheung Kong was the best performed blue chip in net gain, adding 75 cents to $54.50.

  Shares in the property developer were made more volatile by news Peregrine had issued 50 million call warrants on the stock.

  Smaller property investment companies also performed well. Sino Land rose 50 cents or 6.25 per cent to $8.50, Hang Lung Development climbed 30 cents to $15 and Great Eagle added 25 cents to $22.50.

  Conglomerate Hutchison Whampoa attracted plenty of interest following news that its soon to be listed subsidiary Orange is expanding its services worldwide. Hutchison added 70 cents to $49.90.

  Among the smaller counters, media and retail stocks stood out.

  Kent Rossiter, institutional sales manager at Sun Hung Kai Investment Services, said: 'Media and retail stocks have been the pariahs of the investments community.

  'Now it is time to play catch up and investors are desperate to get into any stocks that have lagged the market even if they lack the fundamentals.'   Blue chips Oriental Press Group added 10 cents to $3.15 and South China Morning Post rose 15 cents to $5.25. Sing Tao also gained, adding 20 cents to $3.80.

  Among retailers, Joyce Boutique rose 17.5 cents to $2.25 and Esprit Asia added 5 cents to $2.90.

  H shares bucked the trend with investors keeping clear of the China-backed companies.

  The Hang Seng China Enterprises Index fell 14.44 points or 1.57 per cent to 899.80. Truck and minibus producer Qingling Motors took the most punishment, falling 15 cents or 6 per cent to $2.35.

  Looking ahead, brokers are mixed about where the market is going. Most see the index continuing to climb but fear a correction must take place before long.

  Mr Fernow said: '11,000 could be tested by the end of the week but at that point we will have to question the sustainability of the rally.' 



Overseas cash rush puts brake on slide