FURTHER rises in the Hang Seng Index can be expected this week as overseas investors continue to remain interested in quality local stocks. Turnover last week was $8.36 billion, down $529.4 million on the average in the previous week. The Hang Seng index ended the week 6.36 per cent higher, with the conglomerates doing better than any other sector. Positive sentiment towards the steady growth office rental in the territory has seen many institutions home in on companies like Swire Pacific, Wharf (Holdings) and Sun Hung Kai Properties because of the high or increasing content of recurring office rental income in their profit lines. Swire was up 8.47 per cent to $64, Wharf was up 8.53 per cent to $35 and SHK Properties was up 1.54 per cent to $66. The rumoured arrival of some US$500 million of money to invest in two funds from Yamaichi and Daiwa by the end of the week is expected to fuel positive sentiment. Local politics are not expected to have a significant impact on events, unless there is a final breakthrough in Sino-British relations, which seems unlikely, or investors choose to use some development in relations as a profit-taking excuse following a period of steady gains. Improving Sino-United States relations in the wake of the visit to China of the US Treasury Secretary Lloyd Bentsen and the announcement of talks over the General Agreement on Tariffs and Trade with the US is expected to encourage sentiment. At the weekend, US Trade Representative Mickey Kantor said a delegation on trade would go to China early in February. Part of the visit will focus on China's enforcement of its intellectual property rights, especially to stop the production of pirate compact discs. However, the kind of liquidity surges seen ahead of the big correction in early January are not expected. The index is expected to trade in a moderate range of 12,100 to 10,700. A breakthrough into record territory is unlikely in the absence of major positive news. Some investors are hoping for a quieter period than the last six weeks. A decline in volatility would be welcomed by many institutions, who would benefit from this had they been selling strangles in the index options market. This would also provide them with a market environment against which they could become more active in derivatives. The high volatilities and high premiums dampened activity toward the end of the week. Activity was more concentrated in the over-the-counter market than usual. Between January 12 to January 19 it looked as if index option implied volatility was on the decline from highs above 45 per cent. A dip to around 36 per cent was short-lived and implied volatilities shot back up to near 45 per cent again. The Hang Seng Index 100-day volatility indicator remains on a shallow upward incline and stands at about 30 or 31 per cent. Extensive roll-over activity in futures can be expected in the week as the January index future expires on January 28. During the week the Hong Kong Government is expected to release wage indexes for September, on Monday, and provisional figures on trade for December, 1993, on Friday. Results will come mainly from smaller companies, which the market has failed to follow for around six months. None of the announcements of financial performance data is expected to lead to an index jump either up or down. The best performing stock on the week was Hutchison Whampoa. The group is focusing on the hotel industry, having recently established a hotel division and bought out the Hilton management contract at the weekend. Hutchison's stock was up 13.67 per cent to $39.50. In second place was Jardine Strategic, up 13.6 per cent to $35.50. Jardine Matheson Holdings was third. It has been the beneficiary of strong European buying. European institutions appear to like the Hong Kong conglomerate story, as London listed Inchcape has seen a 30 pence rise in its stock to 585 pence after analysts Goldman Sachs put a strong buy on the company. Jardine Matheson was up 12.14 per cent on the week to $78.50. Following a spate of deals in the property sector Hong Kong Shanghai Hotels was up strongly by 11.11 per cent to $13. Great Eagle was in a $2 billion deal to buy the Rennaissance and the Ambassador Hotel was also sold. Mandarin Oriental was up 10.68 per cent to $11.40, and Lai Sun International, which has the Ritz Hotel in its fold, was up 10.33 per cent to $20.30. New World Development, with its strong hotel operations, was up 10.53 per cent to $36.75.