Mixed trading expected
LAST week's 203-point rise on the Hang Seng Index fizzled out late on Friday, and brokers say investor sentiment will continue to be mixed when trading resumes tomorrow.
Results of meetings held in London by the British Government and Governor Chris Patten over Hongkong's political future were sparse, and investors were uncertain how to react to what little was achieved.
However, brokers said it was something of a relief that London failed to come out with a harder policy on Hongkong's future. There was no deadline set for an agreement to be reached between London and Beijing over political reform in the territory.
This week the market is likely to see less decisive direction. ''July tends to see the market down in general. Holiday time for many institutional investors is coming up and there is usually a slowdown in the summer prior to results in September,'' said Howard Gorges, managing director of South China Brokerage.
Mr Gorges said the concentration of turnover of second-and third-line stocks is likely to continue.
''In the absence of strong direction of blue chips, which are in consolidation, investors have turned their attention to second-and third-liners which they think may be in line for a change in ownership,'' he said, adding that some of these plays were speculative, while others may turn out to be genuine mainland or local takeover targets.
''Superficially this market looks flat but it is moving on second-liners,'' said John Hetherington, manager of research with Asia Equity.
Mr Hetherington is optimistic that recent property market figures may lay the basis for further gains for the market in the immediate term. ''Property pre-sales have been well up, and at record levels in some cases, so I expect to see property counters leading this market in the third quarter, he said.
Mr Gorges said investors remained concerned about China's economic problems, and that talks in London introduced uncertainty into the market.
''There are some people who are wary of investing in China, but they are not that worried or the market would be down further,'' he said.
On Friday the Hang Seng Index closed 12.55 points higher at 7,217.93. Mr Hetherington noted that during the past two weeks turnover had been significantly reduced in blue-chip stocks while investors focused on second-liners, but Friday showed seven out of the top 10 stocks were blue chips.