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SCMP Reporter

With Wall Street interrupted by a mid-week holiday, Hong Kong stocks can expect a quiet four days of trading.

The Hang Seng Index closed on Friday at 13,042.53 points, down 0.99 per cent on the week and 13.6 per cent on the first half of this year.

'The Hong Kong market will remain rangebound and market turnover will be subdued,' Phillip Securities research head Louis Wong Wai-kit said.

However, analysts warned negative sentiment could weigh on the market in the shape of Japan's tankan  business confidence survey. Painting its bleakest picture since December 1999, the tankan sent Tokyo stocks 1.68 per cent down yesterday.

The United States is unlikely to provide guidance with the Independence Day holiday tomorrow.

However, the National Association of Purchasing Manufacturers index, expected last night, and Friday's employment data for last month from the Department of Labor are expected to offer some indications as to the success of interest-rate cuts in kick-starting the US economy.

'The US will be weak ahead of unemployment data on Friday which should give clues to a directionless market,' Mr Wong said.

However, analysts said most eyes were fixed on the release of the US second-quarter gross domestic product figure - expected on July 27.

'I expect a breakout to take place later this month after the release of the preliminary GDP figures,' Mr Wong said.

Second-quarter GDP growth was expected to have been 0.4 per cent, though analysts said a rise was better than nothing.

However, the third and fourth quarters are expected to show signs of a turnaround in the world's largest economy.

Tung Tai Securities associate director Kenny Tang Sing-hing said Hong Kong's weak economic fundamentals would continue to weigh on the market in the second half of this year.

'The operating environment is still not good. The market remains sluggish and the property market demand remains very weak. Earnings growth will not be good in the second half,' Mr Tang said.

Mr Wong said property stocks should manage to sustain their 2.05 per cent uptick from Friday, prompted by Wednesday's sixth interest rate cut from the US Federal Reserve, but investors should not expect many surprises on the upside.

'I think they may be resilient but I doubt there will be too much upside in the near term,' he said.

'They should be well supported as the Fed has left the door open for another, seventh rate cut in August if the economy weakens further.'

South China Securities institutional sales head Raymond Tsui Yick-ki said the present disagreements between pilots and management at Cathay Pacific made the stock worthy of a look-in. The airline closed at HK$10.55 at the end of last week.

'At this valuation it's a good buy,' he said. 'A lot of the bad news is in the price already and any resolution will make it a good buy - the downside from this level is pretty minimal now.'

However, Mr Tsui said that investors could otherwise expect a quiet week. 'There isn't much new to be expected, only more of the same,' he said.

'The market is likely to be heading lower in the coming week because of the absence of new stimulus.'

Key Figures

Friday close: 13,042.53 (+ 214.71)

Turnover: $9.28 bln

Volume: 9.79 bln shares

Day's high: 13,088.75

Day's low: 12,966.68

Advanced: 348

Declined: 315

Unchanged: 394

July futures: 13,041 (+ 201)

August futures: 13,000 (_)

Graphic: prop03gbz



Rangebound trade seen ahead as dealers hunt for signs of US recovery