IT LOOKS as if the silly season is well and truly upon us as the stock market continued to surge, against predictions, throughout much of the last week. The Hang Seng Index finished up more than 89 points at 7,396.77 on Friday. This was a rise of more than 400 points over the week, flying in the face of expectations of profit-taking after a rise of 240 points during the previous week. Many analysts are at a loss to explain why the market continued to approach record levels, although it is expected that it will drift lower this week. Sales director for Cresvale Securities, John Gates, said that for most of last week the enthusiasm could be explained by good news, either real or perceived. ''Whether it be expectations of good news on the airport talks between Britain and China which kicked the week off, or the better-than-expected Midland Bank results which inspired buying in parent HSBC, only to see it spill over into other sectors, most of the buying could be explained,'' said Mr Gates. But even so, there seemed no excuse for buying on Friday, analysts said. Selling has dried up, and there continues to be expectations of good corporate results in the upcoming reporting period. Stuart Gregory of Institutional Sales at Morgan Grenfell questioned why concern over the problems faced by the Chinese economy seemed to evaporate so quickly as the market moved up. There has been no evidence to indicate the economic clampdown by Chinese authorities has been a success, and it is likely the worry of China's overheated economy will once again grip the market. Mr Gregory sees mutual funds and China funds, in particular, as performing strongly. He said: ''Money continues to pour into funds, and they have to find somewhere to put it. ''China funds are also looking to pick up from the market what they could not get hold of at the flotation of China stocks such as Tsingtao and Guangzhou Shipyards.'' The market is looking overdone, and with all the Hang Seng Index futures trading at a discount to the spot market, the long-awaited profit taking should set in. But then, investors seem determined to defy all predictions.