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While the London attacks fail to rattle investors, analysts say index may  give up more ground next week

The Hang Seng Index reacted  calmly to the terrorist attack in London, losing less than half a per cent yesterday. However, it still ended below the key level of 14,000, indicating it might  drop further next week,  analysts said.

The benchmark index surrendered gains made in the morning to finish  66.34 points, or 0.47 per cent, lower at 13,964.47 after trading between 13,920.87 and 14,053.21.

Turnover declined to $16.85 billion from Thursday's $21.55 billion.

'In reaction to the terrorist attack, investors tended  to focus more on the fundamentals of the markets instead of trading emotionally,' said Daniel Chui, head of investor Communications of JF Asset Management.

ICEA Securities said in a research note to clients that investors did not  think the   terrorist attack 'posed a threat to economic activities'.

It added that after the September 11, 2001, attacks in  the US,  the Hang Seng Index recovered losses in less than a month. Also, the markets remained  calm after the bomb attacks in Madrid last year  - the Hang Seng Index falling only 0.7 per cent.

Market observers said some investors stayed on the sidelines yesterday awaiting the US employment figures - June non-farm payrolls data - due later in the day for clues about further US interest rate rises, which accounted for the  drop in  turnover.

HSBC, which accounts for about 33 per cent of the Hang Seng Index's weighting, was under the spotlight yesterday after posting a fall in London after the blast. The  banking group ended the day down 0.4 per cent at $123, accounting for 17.9  points lost on the index.

Oil stocks also lost some allure yesterday after the attack put the brakes on  soaring crude prices. Crude futures for August delivery were down 36 cents, closing at US$60.37 on worries that the London blasts may slow global economic growth.

CNOOC, China's largest offshore oil producer, was the biggest blue-chip decliner of the day, dropping 2.04 per cent to $4.80 after reports saying the company had halted talks about buying US$22 billion in gas from the  Gorgan gas field in Australia controlled by  Chevron.

The mainland firm  is  competing with Chevron in bidding for Unocal. The counter  dragged the Hang Seng Index down 13.1 points.

PetroChina fell 1.65 per cent to $5.95 after recording a string of record highs throughout the week. The company pulled the H-share index down 19.6 points, representing half of yesterday's loss.

The H-share index finished at 4,809.99, a fall of 37.34 points or 0.77 per cent.

Rival Sinopec, the nation's largest oil refiner, fell 0.81 per cent to $3.05.

China Oilfield Services, the offshore oilfield services provider and also CNOOC's sister company, remained unchanged at $3.05 despite ICEA Securities raising its target price to $3.40 on the expectation that it could follow CNOOC by expanding overseas.

Cathay Pacific inched down 0.36 per cent to $14.

Mainland airlines performed better. China Southern Airlines surged 3.61 per cent to $2.15 after four consecutive days of losses.

China Eastern Airlines and Air China were unchanged  at $1.24 and $2.45 respectively.

Kingston Lin, an associate director of Prudential Brokerage, expects the benchmark index to  test 13,800 in the coming week.

'Both HSBC and China Mobile have been under strong selling pressure,' Mr Lin said.

China Mobile fell 1.08 per cent yesterday to $27.55.

The Hang Seng Index July futures contracts ended 100 points lower at 13,927, indicating investors expect a slight fall in the benchmark index this month.



Market stays calm but closes below 14,000