Core Pacific-Yamaichi has forecast a modestly bullish year ahead for Hong Kong equities. Research director Alex Tang Yee-yuk said the market was in the first stages of a bull run likely to extend to 2000. As a result, the company said the Hang Seng Index could finish next year at 12,000 points. It closed yesterday at 10,083.31, up 143.92 points. 'We are more optimistic than other analysts in town,' Mr Tang said. 'It's like we are gazing at a different crystal ball.' Core Pacific-Yamaichi expects share prices to gain as interest rates drop and property prices firm. The company believes property prices will rise 14 per cent. Prices have fallen 41 per cent this year. The research house's target for the Hang Seng Index is at the upper end of predictions, and it is based on a price-earnings ratio of 16 times. Moreover, Core Pacific-Yamaichi is assuming gross domestic product will expand 1 per cent next year. It expects unemployment to peak at about 6 per cent, far lower than predictions by other research houses. Mr Tang said a key to the company's outlook was the belief that the prime rate could fall a further 75 basis points to 8.5 per cent. Core Pacific-Yamaichi recommends being overweight in banks, property developers, conglomerates, infrastructure plays and mainland-related enterprises but underweight in utilities and property investors.