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SCMP Reporter

Hong Kong stocks are expected to be rangebound this week although their fate will be ultimately decided by the health of United States corporate earnings and investor appetite for the remaining Tracker Fund units.

The Hang Seng Index fell 1.11 per cent last week to end at 10,710.48 points.

The US first-quarter earnings season will continue to dominate proceedings this week.

Companies reporting include Microsoft Corp, Nokia, JP Morgan and IBM Corp, which rocked global markets last week after issuing a warning about shortfalls in revenues and earnings for the first quarter.

'The results have not been good over the last week and some companies issued profit warnings. If the results don't go well [this week], it will pressure the US market and then the Hong Kong market,' said Kenny Tang Sing-hing, an associate director at Tung Tai Securities.

However, noting a subdued response on Friday to Thursday's heavy selling in New York, Herbert Lau Chung-kwan, the research head at Celestial Securities, said the worst was over. He was also encouraged by Friday's response to the first-quarter Tracker Fund units. After remaining relatively quiet since their release at the beginning of the month, investor appetite for them suddenly heated up on Friday with the sale of 131 million units.

'It's signalling that the consensus believes that the Hong Kong market should be near its near-term bottom because, despite all the negatives overseas, the selling pressure is not heavy at all,' he said. 'At 15 times [this year's] earnings, I don't believe the market is expensive.'

Mr Lau said the Hang Seng Index was trading at less than two times book value, again suggesting its attractiveness.

Property counters should grab the market's attention today as the first land auction of the financial year takes place.

Mr Tang said that while the auction would be an important gauge of the strength of the sector, he did not believe that property stocks would respond to the sales.

'The response to the auction will be quite aggressive but it won't offer too much incentive to property plays as supply remains large,' he said.

Analysts said that property stocks could shrug off recent downward pressure and stage a slight comeback this week.

As well as keeping an eye on the regulars, such as Sun Hung Kai Properties, Mr Lau said investors should take a look at those stocks with a less obvious exposure to the property sector such as Shun Tak. The stock ended an extraordinary week at HK$1.53, gaining 23.38 per cent in the past five sessions.

Dao Heng Securities deputy research head Eric Yuen Chi-fung said on Friday he expected Shun Tak's earnings - due next Tuesday  - to outpace market expectations due to better than expected results from its jetfoil joint venture between Hong Kong and Macau.

Mr Yuen said the results would also benefit the booking of profits from Liberte, the group's residential development, being brought forward to this year and next.

Davidw@scmp.com

Key Figures

Week's close: 10,710.48 (- 120.89)

Turnover (daily average): $5.9 bln

Volume (daily average): 6.03 bln shares

Week's high: 10,856.64

Week's low: 10,610.76

April futures: 10,650 (- 163)

May futures: 10,632 (- 156)



US results hold sway