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SCMP Reporter

YOU don't need to be a widow with orphans or a pensioner to feel nervous when the Hang Seng Index goes through the roof as it did this week.

 Having closed at an historic 9,031 points on a record turnover of $10.19 billion on Monday, the Stock Exchange has become a high risk zone for many smaller investors.

  Financial Secretary Hamish Macleod has already warned investors across the board that stock markets can go down as well as up and that ''they are for people who know what they are doing''.

  And some smaller investors have already lost their nerve.

  ''I have already made more than $10,000 in less than a week and that's enough. I have gained about 10 per cent of what I have invested,'' pensioner Tam Lai-fong said this week.

  ''The higher [the Index] climbs, the more dangerous it is to invest in the stock markets. What happens if the balloon gets too big and bursts? My money will be locked inside the exchange until the index goes up again.

  ''So why not get out now when I have already made some gains?''   But another question immediately emerges: what can small investors do with a new found wealth which can range from $200,000 to $500,000 at times like these?   With the current low interest rates, it is unlikely they will turn to the local piggy bank.

  ''Foreign currencies are good investments at the moment,'' said the 52-year-old who has already bought $200,000 worth of British sterling this week.

  ''Though bank interest rates are coming down in other countries too, the rates they offer are still higher than those in Hong Kong.

  ''There are other investment options which I guess I can choose, like bonds, but buying foreign currencies is less complicated,'' Mrs Tam said.

  However, financial consultant William Tathan said buying foreign currency such as sterling could be very risky because US dollars (and Hong Kong dollars) move against European currencies more quickly and the exchange rates can fluctuate greatly from day to day.

  In the long-term, the US dollar is likely to strengthen against European currencies.

  For investors who had pulled out of the local stock markets for a breather, Mr Tathan suggested fixed interest bonds, such as European high-yield bonds (in US dollars), as a less risky form of investment which generates a return of 10 to 15 per cent a year.

  For long-term investments, investors can get back into the stock markets but in other Asian countries such as Singapore, Malaysia and Indonesia. The value of their stocks and shares might not accelerate at the same rate as those in Hong Kong over the past two weeks where some investors have doubled their money.

  Safer still, cautious investors can put their money in Asia Pacific funds or simply in the bank, according to Dr Law Cheung-kwok, research director of South China Brokerage.

  ''For those who are more cautious, leaving money in the bank is always a good option,'' he said.

  On the other hand, there is no fixed rule that investors must pull out when the local stock markets becomes buoyant.

  ''Any investors prepared to leave their money [in Hong Kong] will make more through its stock exchange,'' one broker said this week.

  For more aggressive investors like Mrs Grace Ip, a 45-year-old businesswoman, this is the best time to plough more money into the market.

  ''I'm optimistic,'' she said. ''Stocks and shares are good for short-term returns. From what I gathered from my business contacts and other experts in the field, I think the Index will go up to 10,000 points and beyond.

  ''A lot of money has been injected into Hong Kong from all over the world, from the United States, Japan and even Arab countries. Just look at the turnover each day; it's huge.''   The fact that Mrs Ip has recently sold her house on the mainland, and injected $800,000 into the local market shows she is confident about its future.

  ''It makes sense really, if you look around, there are no other investments which generate such big returns in such a short period of time,'' she said.

  ''Unlike some investors, who just hang on to their shares indefinitely, I'll sell all mine when the time is right. You'll never make real money if you just leave it in the markets to earn interest.''   But isn't she worried that the market might collapse like it did in 1987?   ''No, with my experience, which is over ten years, and from what I have read in the newspapers, I'm confident that the Index will go from strength to strength,'' she said.



Taking stock of it all