Stocks bought up on upturn in sentiment as rate cuts announced

A LACK of direction and nervousness about blue-chip results snapped the winning streak early last week, leading the Hang Seng Index marginally higher but falling off the five-month highs it reached on Wednesday.

The benchmark index closed the week at 11,735.50, just 171.2 points higher than during the week, and off its Wednesday close of 11,810.63, its highest level since October 21. Average daily volumes during the week were $8.53 billion, higher than the previous week's $7.94 billion, but off the $9.22 billion daily average this year.

Earlier, buoyed by hopes for a cut in interest rates in the SAR, the brightening picture across the region's financial markets and Tuesday's positive land auction, investors went on a buying spree. By Wednesday, the index had gained 246 points over the previous week, boosted by the land auction and Beijing's move to ease interest rates.

Schroder Investment Management director David Lui Yin-tat said: 'The magnitude of the cuts was a bit disappointing, but that may mean further cuts in the pipeline.' The easing, which came less than a week after Zhu Rongji's appointment as premier, will ease the interest-payment burden on mainland corporates.

On Tuesday, the People's Bank of China trimmed bank lending rates by an average 0.6 percentage point and lowered bank reserves requirements to 8 per cent of deposits from 13 per cent.

But by Thursday, wariness about results from Li Ka-shing's companies led to selling, as sentiment soured after Henderson Land reported that a 27,9 per cent drop in interim profit to $3.83 billion the previous day.