Hong Kong's stock and property markets face increased risk and the dollar could come under speculative attack ahead of next year's change of sovereignty, economic consultancy DRI/McGraw Hill says. It said with less than 12 months left before Hong Kong's return to China, Beijing's interfering hand could already be felt. 'There is already widespread concern over the preservation of Hong Kong's commercial independence and whether or not the Hong Kong administration will be given enough leeway to resist mainland institutions that seek unfair advantage,' it said. Credit-loosening in China in the next 12 months would mean prices would continue to rise, it said, adding 'the risk of a major price drop in Hong Kong's property market is high in the next few years whatever credit policy China pursues'. It warned the Hong Kong dollar could come under attack as soon as foreign funds started to pull out of commercial property and equities. Hong Kong always had been highly sensitive to political uncertainties in China, and to international capital movement, it said. The consultancy said that this sensitivity, combined with the market's vulnerability to interest rate increases in the United States, heightened the likelihood of volatility. Commercial property was a high-risk area and had a legacy of volatility after the 20-30 per cent drop in prices during the past two years, followed by marked improvement this year as sentiment towards the handover improved, the consultancy said. However, it said the 'ample resources [of the Hong Kong Monetary Authority]' were likely to allow the currency to remain pegged to the US dollar in the short term. There was risk potential also in future export growth, which was already affected by the shift of manufacturing to China, it said. Economic growth is assured after the slight downturn last year. However, there were dangers caused by reaction to the transition and the transformation of the economy, it said.