BROKERS expect investors to take a cautious approach this week as they wait for China and Britain to begin discussions in Beijing on Thursday about Hongkong Governor Chris Patten's proposed democratic reforms. They believe the Hang Seng Index will hover between 6,700 and 6,800, with profit-takers replaced by investors still under-weighted in the market. Mr Howard Gorges, director with South China Brokerage, said the market needed a breather after last week's surge of more than 400 points. He said much of the early enthusiasm about the Sino-British meeting had been tempered by indications from China that the talks would not produce immediate progress. ''With a news black-out and both sides probably issuing separate releases, people will be listening to rumours,'' Mr Gorges said. Given this environment, he said, it was unlikely the market would break out again but a firm undertone, evidenced by strong turnover, could produce a jump of 150 points. Mr Alex Tang, research director with Dao Heng Securities, said there were still many uncertainties affecting the market, including China's Most Favoured Nation status with the United States. ''It is only prudent for us to advise investors to be cautious at the current market prices,'' he said. With the market up 25 per cent in the past three months, Mr Tang said, it was time for investors to either adopt a wait-and-see approach or take the opportunity to sell some shares and wait until it consolidated. He said it was important for investors to remember the sharp market climb was also partly due to strong corporate earnings, which were expected to improve by 15 per cent on an earnings-per-share basis this year. Two new stocks will be listed on the exchange today, Wanon International and New Island Printing Holdings. Wanon, which makes cordless telephones, has issued 66 million shares at $1 each. New Island, involved in the printing and manufacturing of packaging products, books and brochures, has issued 50 million shares at $1 each. Among the companies reporting this week are Dah Sing Financial Holdings and Chi Cheung Investment, which will release final results today and Thursday respectively. The only blue chip to fall last week was textile maker Winsor Industrial, which dipped 0.81 per cent to $12.20. Cathay Pacific showed a modest gain of 1.6 per cent to $9.50, while China Light was up 2.84 per cent to $36.25. The best performing blue chip was Miramar Hotel, which jumped 17 per cent to $11.70. Miramar is now sporting a hefty price-earnings ratio of 146.25. Jardine Matheson Holdings was also a strong performer with a 13.04 per cent jump to $52. The highlight of Jardine's performance was a $7 jump on Wednesday. SHK Property was the best performing stock in the property sub-index with a 10.16 per cent climb to $35.20.
