So much for China's supposedly overheating economy. Equity markets appear untroubled with the Hang Seng Index flirting with 41-month highs and H shares recovering to early-year levels before austerity measures were introduced. There is a back to the future feeling with the dominant market drivers being similar to a year ago when traders had to wrestle with a plunging US dollar and spill-over effects into a range of asset classes. Again more hot money flows are targeting a yuan revaluation while gold and commodity-backed currencies are soaring in value. Hong Kong's fixed exchange rate dictates that capital-markets adjustments take place in monetary aggregates - in this case a surge in Hong Kong dollar funds sitting in the banking system. Higher asset prices have been the result. And with stock-market turnover pacing $20 billion plus a day and China Netcom chalking up a 10 per cent gain on its debut, bulls have plenty of encouragement. Retail investors, always quick to sense a return of first-day gains in the initial public offering market are now gearing up for a bonanza with Air China's offer. It may yet time its listing as fortuitously as last year's blockbuster China Life. A recent Credit Suisse First Boston note pitched a continuation of the reflation theme. Its argument was that the deficit will be reversed and the housing market will continue to recover with the compounding effect that individuals see a rise out of negative equity. It also says money flows from a continued influx of mainland tourists will likely offset effects from a slowing mainland economy. What is more the opening of Disneyland next year, rounds off CSFB's list of reasons to buy. This promises to give another dimension to Mickey Mouse stocks, and why not given the run up in Macau casino concept stocks? A similarly upbeat assessment was relayed at a presentation by Richmond Asset Management this week. The alternative money manager sees more upside for equities and continued weakness in the US dollar. Less time was spent explaining exactly why - although reflation and Disneyland again featured - as more important were the flashing green lights triggered by momentum and technical indicators. Another consideration is cash sitting on the sidelines waiting to sustain upward equity moves. The cost of leaving money on deposit in Hong Kong rose last week as banks trimmed lending and deposit rates, despite recent increases by the US Federal Reserve. According to a Merrill Lynch fund manager survey, this has not gone unnoticed. Hong Kong emerged as the most favoured market with 16 per cent of managers overweight here. Fund managers still have excess cash and the pressure to put this to work or risk missing out on a final-quarter rally - on which performance is measured - should not be overlooked. The other big factor is the fickleness of fund flows, which are not called 'hot money' without reason. If the US dollar finds renewed vigour, expectations of a yuan revaluation could reverse. Still that hardly looks likely for now with reports of Shanghai residents' queueing to switch US dollars into yuan. Some commentators also warn the fall in the greenback will not necessarily be benign for equities. If it turns to a rout, US interest rates might need to rise sharply. Yet for now the market once again looks primed for another leg up.