But by the middle of the month the jitters had returned, and the index was back below 20,000. So what happened and what lies in store for investors for the rest of the year?

The consensus among analysts seemed to be that simply too much money had been chasing too few stocks and investor appetite for risk had risen to levels where something had to give.

In its March issue, the Bank of China (Hong Kong)'s Monthly Economic Review noted that 'based on recent economic data, the current global market correction was not caused by fundamental economic factors' but was rather a knee-jerk reaction to a retreat on China's equity market.

Exacerbating that problem was the matter of 'excess liquidity which had driven asset prices to very high valuations'.

In the circumstances, a correction was both overdue and healthy. Investors should watch closely to see if Beijing policymakers move to slow the pace of growth in China, analysts suggest. Any hint of a sharp correction in China's economic expansion, and hence corporate earnings and share prices, would spill over directly into Hong Kong share prices via the 367 mainland enterprises listed on the Hong Kong market.

They are collectively responsible for half (or HK$6.72 trillion), of the entire market capitalisation of HK$13.4trillion.

But if Hong Kong consumer sentiment is a gauge, jobs remain secure and salaries should continue to rise during the year as the economy continues to expand.

Latest available data from the Hong Kong Monetary Authority released in mid-February showed that credit card spending was up 12 per cent in December as cardholders raised debt to pay their taxes and go shopping for Christmas.

That faith appeared justified based on comments from Enoch Fung, Goldman Sachs' Hong Kong economist, who noted that the unemployment rate remained at a six-year low of 4.4 per cent in December, with the jobs' market a 'key theme' for the rest of the year.

'We expect the buoyant labour market to spur growth in wages and, in turn, consumption,' Mr Fung said.

'The prospects of lower interest rates heading into the second half, coupled with the strong labour market, should continue to add fuel to consumption growth and the asset-reflation cycle.'

The HKMA, meanwhile, which also manages the fiscal reserves of the Hong Kong government, rode the equity wave to record investment income of HK$103.7billion in 2006 - of which a shade under HK$29billion was attributable to the government's own coffers. With the net budget surplus running at HK$55.1billion, and an accumulated surplus in the Exchange Fund of HK$507.7billion, the city was in a sound fiscal position to give hand-outs in the recent budget and the possibility of additional measures during the rest of the year.

But the authority's chairman, Joseph Yam Chi-kwong, warned against expectations of a repeat performance for the market and the Exchange Fund.

'It is unlikely that the Exchange Fund will achieve the same high return seen in 2006,' the HKMA chairman said. 'The rise in equities markets that we benefited from in 2006 makes the prospects for those markets in 2007 more uncertain. Economic buoyancy and excess liquidity have led recently to some volatility in asset markets, and this may well increase.'

Uncertainties about the global economy and the outlook for inflation in major economies would make it difficult to predict trends in interest rates, Mr Yam added.

According to the American Express outlook for the Hong Kong economy in 2007, Hong Kong interest rates would 'remain largely stable' with the US Federal Reserve putting interest rates on hold for most of 2007.

Unemployment would stay low, while 'property prices should increase further' due to new housing supply remaining constrained, according to the outlook.