ANYONE buying on the stock market today in a big way has got to be nuts or a very long-term investor. After a record rise of 371.53 points or 5.78 per cent on the Hang Seng Index to 6,789.74 yesterday, there will have to be some kind of consolidation from current levels. Market indices do not go up in straight lines. Yesterday's intra-day jump to 6,800 was a significant signal that the days of trading in the 5,250 to 6,250 range are over. However, the market is bound to want to test old ground and disruptive or unhelpful comments from either side in the Sino-British talks starting on April 22 are bound to provide plenty of excuses for investors to jump ship and take profits. Fundamentally, the market remains attractive with very healthy liquidity, historically high levels of overseas interest and low market valuation. It was even more attractive at 4,978 on December 3, when market investors first fell out of their prams on the outbreak of the Sino-British democracy row. Yesterday's close is 36.4 per cent ahead of the December 1 close. Investors had another chance to get in cheap in March when the index slid back to 5,854, after reaching a high of 6,508 on March 9. Yesterday's close is 18.8 per cent ahead of the 5,854 close scored on March 15. People buying today might be labelled as white-socks investors. If 8,000 is realised in the next month or so, up another 17.8 per cent on yesterday's close, then of course the white-socks investors might have been right to buy. Brokers yesterday suggested the rules in the on-going Sino-British impasse have subtly altered. The impasse technically remains in place because, after all, the two sides have only agreed to talk. However, it appears Beijing has, for now at least, dropped the bully-boy tactics in its opposition to Governor Chris Patten's plan. For the first time in years the British, led by Mr Patten, have shown themselves able and willing to play at brinkmanship in this whole affair. In these circumstances, maybe the shocks to sentiment, when they do come, will be less significant than in past onslaughts from Beijing. In the absence of any real increase in local corporate earnings expected on the back of possible future Sino-British agreement, it appears yesterday's rise in the Hang Seng Index shows investors are prepared to pay more for the same earnings growth. Hongkong's stocks are being re-rated - but that is no excuse for investment professionals to be buying on the day after a record rise in the index.
