Wild ride forecast to propel HSI lower

The Hang Seng Index will take a roller-coaster ride up to 12,000 points in February before collapsing to about 5,500 points by the end of next year, according to SG Securities regional technical analyst Tom Schroeder.

'I'm looking at 10,900 [points] by the end of [this month],' he said. 'From there, I see a tumble in December to 9,200.

'Then running into the 'January effect' and a flush of liquidity around the Lunar New Year, [the index would reach] 11,800 to 12,000 in mid to late February.' The index finished yesterday at 9,851.93 points, 47.91 per cent higher than its year-low of 6,660.42 points, reached on August 13.

In technical analysis market movements are predicted according to historical price and trading patterns.

Mr Schroeder said Hong Kong was in the midst of a bear rally, partly because of rising liquidity as interest rates fell around the globe.

Investors might have plenty of time to ride this rally. 'Bear rallies can last three to six months,' he said.

Hong Kong and other regional markets would come under pressure after February in reaction to market declines on Wall Street and in Europe.

Mr Schroeder said the outlook for the Japanese yen was shaky.

If the yen broke through the level of 120 against the US dollar, it could fall quickly back to the 130 level, he said.

Yesterday, the yen was trading at about 119 to the dollar.

Mr Schroeder said he did not fear that regional markets would correct fiercely in reaction to a weakening yen.

The yen's recent strength had helped fuel stock market rises by taking pressure off regional currencies and allowing interest rates to settle.

'But now we're moving into a mode where people are saying, 'We can't export a thing,' ' Mr Schroeder said.

'We need stable - but weaker - currencies.' Mr Schroeder said he expected markets in Thailand, Singapore and South Korea to lead recoveries, based on the theory of those markets that were first to enter crashes would be the first out of them.

'They went into it early and they should come out earlier,' he said.

He also said liquidity patterns would help emerging markets in the short term.

'I would put my money in Asia,' he said.