MANY Hong Kong fund managers are sticking to their bullish forecasts for the Hang Seng Index. Fund management groups say investors have reacted calmly to last week's slide, even though few are taking advantage of the lower prices to add to their holdings. Fund management houses are urging investors to retain their confidence in the underlying strength of the index. Cynics may claim managers are being driven by a vested interest - increased fees. The market is facing and will remain under pressure from several quarters - political tension from the China-Taiwan row, next year's handover, the continuing row between the United States and the mainland over intellectual property rights and question of whether Washington will renew China's Most Favoured Nation status. Even so managers are urging investors to look past all that to the underlying economic and corporate fundamentals. Jardine Fleming, Hong Kong's biggest fund management group, believes that this year the index will push up to a record of about 13,000 points. Mike Ryder Richardson, marketing director, said: 'We are still very optimistic over the medium to long term. Our view has not been shaken by the events of the past week.' But he warned that there was likely to be continued volatility and uncertainty: 'The market will be driven by improving fundamentals. The improvements in the property market and the wealth effect that this creates will be felt throughout the economy,' he said. 'In addition, the political tension over the handover in 1997 is easing and sentiment is improving.' Stella Yiu, director, Asia Pacific Equities, added: 'The sharp correction that has occurred in Hong Kong and the rest of Asia was expected, and has not altered our optimism about these markets' medium-term prospects. 'At around 10,300 points, Hong Kong is now fairly valued and we remain optimistic about the market's medium and longer-term prospects. 'Following a period of consolidation, we believe it could move higher as analysts begin to revise upwards their forecast corporate profit growth for 1997 and a relaxation of credit occurs in China.' Ms Yiu believes short-term concerns about earnings deceleration, profit-taking after 12 months of gains and a slowing of the economy should be offset by low and stable US interest rates and the consolidation in the property market. Cheah Cheng Hye, a partner with Value Partners, said: 'We are going to see sideways trading until the China-Taiwan situation is resolved. 'I am cautiously bullish but no one is outright pessimistic.' He believes 10,000 points remains a strong support level and thinks the market will push through to about 12,000 before the end of the year. 'Most do not think there will be a war between China and Taiwan because everyone has too much to lose. Everyone is fairly convinced that after the posturing it will be resolved,' he said.