The Hong Kong share market could find a firmer tone this holiday-shortened week after banks announced a surprise quarter percentage point reduction in interest rates on Friday.
The cut, which would take the prime rate to 9 per cent from today, could help the Hang Seng Index extend last week's 2.75 per cent rise, brokers said.
There was caution, however, about external events, including possible fall-out from United States President Bill Clinton's historic impeachment and tomorrow's Federal Reserve meeting on rates.
'It is a little unlikely [that the Fed will cut]. I expect the [US] cuts to come early next year,' Dharmala Securities research director Ben Kwong Man-bun said. 'It will be very quiet. The market will continue to be dominated by futures trades.' Brokers said the index would trade with support at 9,800 points and resistance at 10,500 points. Last week, the index closed at 10,226.23 points, just 4.63 per cent down on the year.
Turnover was seen as subdued with some investment houses having closed their books for the year and others winding down operations ahead of the holidays.
'Most institutions are not going to do anything at this time of the year. We have seen a continuous shrinking of turnover,' Amsteel Securities associate director Sean Li Chok-sun said.
Last week, trade averaged just $3.26 billion a day, compared with $8.21 billion in December last year.
