Index poised to set record

MARKET sentiment has turned optimistic as Governor Mr Chris Patten's reform proposals were not gazetted on Friday. The Hang Seng Index is expected to test the previous high of 6,470 this week, brokers said.

Speculation of a resumption in Sino-British negotiations sparked a massive surge in Hongkong shares on Friday with the index rising sharply by 148 points. Trading volume was robust at $4.56 billion, with the index closing at 6,351.

''A lot of new buying orders from overseas investors came as speculation on reopening talks between China and Britain would bring an end to the row,'' said Mr Adrian Ngan Wai-hung, associate director of Vickers Ballas.

''Corporate results are coming that may stimulate buying interest. For this reason, the market is expected to have a minor correction while buying orders may push the index to a new high [this week]. Current situation indicates that upside potential is much greater than the downside,'' he said.

''Banking sector results and the Budget will be revealed [this week], and optimistic sentiment will overcome the pessimistic mood. But as the index approaches 6,400, investors will be cautious,'' said a dealer of the Forex Group.

''The banking and property sectors as well as Jardines will be worth watching. The Hang Seng Bank has risen by $2 to reach an all-time high of $63 because investors expect the bank to announce a good result and dividend bonus,'' said Mr Ngan.


As some of the existing covered warrants are due to expire soon, many institutions are actively involved in these derivatives. Examples include China Light, Hongkong Land and Hang Lung, but the premiums are lower than the previous issues.

Reports of further delays in the debate over Mr Patten's electoral reforms sent investors back into the market on Monday, pushing the Hang Seng Index through the 6,200 level.

On Tuesday, confusion over remarks by China's most senior official on Hongkong affairs, Mr Lu Ping, helped trigger profit-taking, sending the index down 82.69 points.

The market bounced back on Wednesday, ending 28.5 points higher on continuing hopes of a breakthrough in Sino-British relations.


On Thursday, optimists and institutions looking for cheap stocks pulled the index up 26.19 points, and above the 6,200 mark.

The index rose, fell and then rose during the week as investors took differing views on resumption of talks between China and Britain.


The best performers on Friday were Prod-Art technology which rose 13.4 per cent to close at $2.95; Wah Ha Realty which rose 10.7 per cent to close at $1.45; JCG Holding which rose 10.25 per cent to close at $3.22.

The worst performers were Holian Investment which fell 10.4 per cent to close at 30 cents and IHD Holdings which fell 6.4 per cent to $2.20.