SHARE speculators in Hong Kong stubbornly cling to the beliefs that have caused the Hang Seng Index to remain over its logical floor of 6,000. Consider that at about 9,000, the level at which the Hang Seng stood last Sunday, of the 50 largest capitalised stocks, 20 pay less than three per cent dividend yield, 11 pay less than two per cent and three pay no dividend at all. Virtually all are priced above their book value. The market has formed double tops, which is generally an indicator of a further fall. It appears to me the market must approach 6,000 before a prudent investor should consider buying. When it corrects to this level, the market will still be bullish because liquidity is still reasonable despite much foreign hot money leaving. The main thing in its favour are the excellent corporate earnings, with companies such as CITIC, Cheung Kong, Hutchison and Wharf having earnings of 80 per cent, 31 per cent, 90 per cent and 28 per cent respectively. Another favourable factor is that it seems likely the United States will renew China's Most Favoured Nation trading status. As a guide to investing in the Hong Kong market, use the ''rule of 20''. Add the consumer price index (CPI) inflation rate plus two (the reason for adding two is because all governments understate the CPI) to the price-earnings ratio, and if this exceeds20, the market is overpriced. Money can only be made reliably when you buy something when it is undervalued and sell it when it is overvalued, not the other way round. The latest issue of the Canada-based China Analyst says a correction should help wring out speculative pressures and allow investors to focus more on economic fundamentals, particularly in the current political climate between Britain and China. Even so, the market is likely to retain its volatile nature in the months ahead. Cash in on currency THERE are times when all investments look risky and unprofitable. But this is not one of those times, as there are many good investments that have acceptable risk. If you don't share my optimism, then park your money in cash until you can find an investment you like. The best currencies in which to have interest-bearing deposits include the Austrian schilling, German mark, Dutch guilder, Swiss franc, New Zealand dollar and Australian dollar. US and Canadian dollars are weakening and the British pound must break decisively above US$1.51 to show it is capable of rising. My favourite stock markets for the remainder of 1994 are Japan, Switzerland and South Korea. Mutual meltdown IN 1993, practically every stock market in the world rose, some by 100 per cent or more. Interest rates were low, liquidity was high and fixed income and money market funds paid little.At times there seemed few alternative investments to equities, as everyone was buying into mutual funds. The mutual fund mania in 1993 brought in US$2.2 trillion (about HK$17 trillion). Once mutual funds rose, every new buyer pushed the market higher, creating a snowball effect. But the skill of the fund manager was not part of the equation; the ever-increasing highs were caused by the receptiveness of the buyer and the sales ability of the fund salesmen. The meltdown of mutual funds is now on, and investors are retreating. The Asian Wall Street Journal reported recently that one leading mutual fund sales company, which reportedly had good results in 1993, had seven funds which ended February among the worst performers of their categories since the beginning of the year. This was according to data from the Hong Kong Investment Funds Association, which monitors open-ended funds registered in the territory. Redemptions can quickly shrink a fund size, making its borrowed money a larger proportion of the fund's value. Some funds have to sell shares prematurely to pay off some of their debts. One might presume that funds that borrow add to the possibility of arun (much like a bank run) on mutual funds. Funds have also had some bad press, with the Economist recently stating some US mutual funds are under investigation by US regulators for various questionable practices, including fund managers making a private investment for themselves before making a buy for the fund. The massive buy for the fund was motivated, allegedly, by a desire to increase the worth of the fund manager's holding. Barrons, the financial weekly, reports that mutual funds commonly use past performance as a method of selling their funds. However, it points out that past performance counts for naught. The good performance of a fund in previous years has no linkage withthe performance for the coming year. Buying a fund on past performance only makes sense if the fund will guarantee that next year's results will equal the previous performance and are willing to back it with a guarantee. But few are willing to do this. Barrons points out that in recent years mutual funds have been sold, not bought. A fund salesman telephones a prospect and uses a ''friendly aggression'' hard sell approach. Usually they invent an urgency reason to buy now. They have a special well-rehearsed reason why a specific opportunity is only open for a short time. They tell the prospect they will put his name down with a four-hour deadline. They will call him at 5 pm and unless he decides by then, the opportunity will go to someone else. The market obviously needs today's meltdown but it also needs mutual funds to fulfil what they offer. If they do not make good their promises, such as when they use previous year's results to sell, they should guarantee previous years' results for the coming year. That said, the principle of mutual funds is excellent; they pool many investors' money together, receive lower commissions from brokers and employ a manager who is highly skilled. Even so, the meltdown is long overdue. The emerging tide EMERGING markets have been exceedingly popular in recent years, but they are unpredictable. An update: Argentina faces a likely devaluation this year. Social unrest is probable. Falling inflation and a buoyant stock market are pluses. Brazil. A carnival atmosphere plagues the stock market which has risen to heights it cannot sustain. Best to stay out. Colombia. Money can be made, but with risk. The market has liquidity from oil, the election and drugs. The stock market probably offers more opportunity than most. Chile is the market where equities can rise. Good fundamentals. A credit rating upgrade is likely. Venezuela. Better than it was, but fundamentals do not support a major stock market increase. Mexico. The peso is likely to devalue further in a significant way. Hedge the currency with all investments. North American Free Trade Agreement benefits exist. Interest rates increases are politically unacceptable so inflation will be a problem. Indonesia. Strong bull market is justified. This is a place where money can be made with minimal risk. Hungary. Awash with cash and a lower foreign requirement. Probably the best opportunity in eastern Europe. Poland is in the midst of a bull market. The new budget opens the way for a deal with the International Monetary Fund. Turkey. A great profitable stock market in 1993 but one to stay out of in 1994. Market is now undergoing a massive shake out which will continue. Portugal. A great hidden secret. The escudo is super attractive. Buyers have overlooked Portugal, which has much to offer in bank stocks, food stocks and all that can benefit from nearly the lowest wages in Europe.