Market players remain optimistic as a prosperous year finishes with a surprisingly strong trading turnover Hong Kong's blue-chip index ended the year on a bright note yesterday, boosted by gains in property and mainland stocks. After notching a 13 per cent rise last year, the index was expected to continue its rally this year, observers said. The Hang Seng Index rose 66.59 points or 0.47 per cent to 14,230.14. With only half a day trading, market turnover was $9.72 billion, a level considered strong given that many institutional investors were still on holiday, traders said. 'Many investors are holding a positive outlook for [this year], as so far, there is no sign that money is flowing out of the Hong Kong stock market,' Core Pacific-Yamaichi International head of research Alex Tang Yee-yuk said. 'As such, although the Hang Seng Index saw a slight correction on Thursday, mainly on H-share weakness, the bull market we have been seeing since April this year is expected to extend itself to at least the first half of [this year],' Mr Tang said. Three market analysts said unanimously that they expected the Hang Seng Index would reach 14,500 this month. They said property, banking and H shares would fuel upside momentum this year. Property stocks took a head-start yesterday, as Swire gained 1.96 per cent to $65, Wharf rose 1.12 per cent to $27.20 and Henderson Land gained 1 per cent to $40.40. 'Property stocks will continue to outperform the market in the first quarter next year, backed by the improving overall economy and the city workforce's salary, which is trending upwards,' Mr Tang said. However, he added that such gains may slow in the second half of the year as the city's interest rates could begin to trend higher along with those of the United States. Yesterday, leading gainers were Cosco Pacific, up 4.21 per cent to $16.10, and conglomerate China Resources, which gained 2.97 per cent to $12.15. Peace Town Securities director Francis Kwok Sze-chi said Chinese logistic plays would continue to perform well this year, backed by the country's stellar economic growth. In fact, Mr Tang said that last year, the H-share index had dropped 5.5 per cent from a year earlier, mainly on profit-taking after a strong gain in 2003. The H-share index yesterday gained 32.81 points or 0.7 per cent to 4,741.32. 'The poor performance of the [H-share index] this year will bode well for its recovery next year. We expect that on average, H-share companies will have 10 to 12 per cent earnings growth [this] year,' Mr Tang said. Sinopec Beijing Yanhua continued its previous day's strength and closed 0.68 per cent higher at $3.675. On Thursday, its parent Sinopec offered to buy all the shares it does not already hold at $3.84 each in a $3.84 billion privatisation deal. Tai Fook Securities research director Andrew To Koong-hung said: 'Before minority shareholders vote for the deal, its share price will trade at a 5 to 8 per cent discount to the selling price, because so long as the deal is pending shareholders' approval, investors will likely hatch their loss by avoiding bidding too close to $3.80 selling price.' Yesterday, Lenovo, which recently agreed to merge with IBM's personal computer unit in a US$1.75 billion takeover, was the biggest decliner among blue chips, losing 2.11 per cent to $2.325. A recent regulatory filing by IBM showed that the unit had piled up cumulative losses of almost US$1 billion in recent years. Meanwhile, HSBC gained 0.76 per cent to $133. Last year, the banking sector, suffering from narrow interest-rate margins, disappointed with a market-lagging 7.5 per cent gain but Mr Tang said this would change in the year ahead. Banks in Hong Kong probably will raise rates by the second half to match the US interest-rate uptrend. Analysts said conglomerate Hutchison Whampoa would also perform well this year, as the previous gloom surrounding the 3G business had eased with its recent release of better operating performance data. The group now has 6.3 million 3G users worldwide. Mr Tang said: 'Its spin-off of its Italian 3G unit will also help bolster investor sentiment towards the stock.' Hutchison group managing director Canning Fok Kin-ning has said the group will spin off its Hutchison 3G Italia this year.
