The Hang Seng Index will rise to 18,336 points at the end of next year with the market undergoing dramatic structural changes as technology forces out the old to make way for the new, a Business Post survey of analysts has found. The survey reflected opinion that the index - which hit a record of 16,833.28 on Christmas Eve - could be trading as high as 26,000 by the end of the year on the back of improving economic fundamentals and a continued buying spree in the telecommunications and high-technology sectors. An overall bullish sentiment was the dominant theme for next year, although a consolidation in the spring was seen as likely after a possible Wall Street slump early in the year. Some investment banks also believed improved earnings in Hong Kong might not be enough to justify stock prices. A US interest rate rise expected in the first quarter could trigger selling pressure in the US markets and the local index could subsequently reach a trough of 14,500 to 15,500, some said. However, despite any fallout from the US, the market is expected to rebound on further global liquidity inflow as domestic growth progresses. 'The mentality that has driven the market has switched from being driven by the Fed and interest rates to a mentality driven by growth, recovery of earnings and economic growth,' Morgan Stanley Dean Witter managing director Peter Churchouse said, referring to the US Federal Reserve. For example, economic growth in Hong Kong is expected to climb to 6.6 per cent in the first quarter, led by robust growth in re-export trade, according to research commissioned by the Better Hong Kong Foundation. The mainland's vital link in the Hong Kong economic chain will be heightened as Beijing potentially becomes a member of the World Trade Organisation, perhaps as early as the first quarter. Service-sector reform could only be accelerated in the new year on the back of WTO entry, analysts said. 'We will see faster growth in trade and investment into China,' KGI Asia associate director Ben Kwong Man-bun said. Tung Tai Securities research manager Kenny Tang Sing-hing said some funds would likely come into the market on the mainland's admission to the WTO. 'Altogether these factors will push the index to a new high at the end of the first quarter or early part of the second quarter,' Mr Tang said. The telecoms sector is expected to be a stand-out performer next year, as mergers and acquisitions change the face of the industry. Hutchison Whampoa and China Telecom are marked as telecoms outperformers. Among the conglomerates, First Pacific is seen as a strong recovery play and Richard Li's Tzar-kai Pacific Century CyberWorks is viewed as the leading Internet performer. While the property sector can only benefit from a recovering economy, the index itself - historically dominated by Hong Kong's property giants - is set to become less dependent on such counters. Furthermore, index stocks will continue to strike deals in the hi-tech area in a bid to re-invent themselves. Investment banks see the index becoming more mainland-oriented, with initial public offerings from China Unicom and China National Offshore Oil to be swiftly followed by inclusions in the Hang Seng Index. Adrian Faure, head of Merrill Lynch's Hong Kong research, estimates that within 12 months the mainland will represent 35 per cent of the index's market capitalisation, against 17 per cent now. Merrill believes Asian markets will be the best-performing globally next year, heralding next year 'as an even better year than 1999' for regional markets. 'Why is this? The domestic economies are recovering . . . you're looking at a region that is highly leveraged to what happens in the global economies,' Merrill Lynch economist Bill Belchere said. 'When the trade cycle kicks in, you have a tremendous upsurge . . . now we're moving into double-digit export growth again.'