LAST week's 9.5 per cent jump in share prices has sent the Hang Seng Index (HSI) to a new record high and brought the total gains so far this year to 59 per cent. This glittering performance seems frightening: all technical indicators point to an overbought position and a correction afterwards. But Hong Kong is not alone in the latest regional bull run; other Asia-Pacific markets have done equally well, albeit to a lesser extent. Indeed Hong Kong ''underperformed'' Southeast Asian markets in terms of price/earnings (P/E) valuation. At closing, this market traded at 15.3 times prospective 1993 earnings, while Southeast Asian markets traded at an average of 20.4 times. An alignmentof performances will take the HSI to 11,685, which also coincides with the achieved levels during market peaks in the eighties. Triggered by the flotation of Singapore Telecom, huge overseas buy orders have pushed up Hongkong Telecom share price by 31 per cent in the past 10 trading days, bringing its prospective P/E (25.3 times) closer to that of Singapore Telecom (27 times). Hongkong Telecom accounted for more than one-fifth of HSI's recent gains. If the performances of Hongkong Telecom and Singapore Telecom, second largest and the biggest capitalised stocks in their respective markets, are representative, Hong Kong should trade near Singapore's P/E ratio, which currently stands at 22.5 times. The single most important factor that has driven this market is plentiful liquidity. There is simply too much money chasing too few good quality large capitalised shares. The growing trend of issuing convertibles rather than straight equity shares by locally-listed companies has effectively limited the supply of the ordinary shares, forcing prices to go up. Hong Kong will undoubtedly undergo a fundamental re-rating, should the Beijing and British governments agreed on a political blueprint acceptable to Hong Kong people. In case it does not happen, the prevailing low interest rate environment will protect this market from a substantial fall. As the market moves into overbought territory, investors will generally prefer laggard stocks. In fact the latest rally has so far concentrated on a small group of blue chip shares, leaving behind a lot of ''relatively cheap'' choices. With a broad business exposure between Hong Kong and China, CITIC Pacific is a prime beneficiary of the recent country re-rating. The company's China prospects should deserve a premium rating over other large capitalised stocks. Jardine Strategic Holdings is another bargain. The stock is trading at around 10 times prospective earnings, one of the few with a strong recurrent income base. Faster earnings growth expected in the next two years should bode well for its share performance. Frederick Tsang is head of research at Morgan Grenfell Asia.