The decision by the Hong Kong Association of Banks to raise interest rates last Friday will also add to selling pressure.

Most brokers were not anticipating a rise on Friday, and might have been caught unawares.

Trading last Friday afternoon saw a last minute sell-off based on interest rate fears wipe out the day's gains, but the small volume indicates that there may still be some investors who will want to unload their positions when the market resumes trading this week.

Brokers said although the market was expecting an increase in interest rates, they thought it would come later rather than sooner.

The rate rise will also have important implications for property and bank sector stocks.

Residential property developers will feel the pinch more than commercial developers as mortgage rates make housing even less affordable.

However, with the property market stronger than ever, there will probably be little effect on property stocks in the short term.

Bank stocks may be more affected, because the decision to increase deposit rates by 0.5 percentage point while increasing lending rates by 0.25 percentage, with effect from today, will tighten bank margins.

Hang Seng Bank attributed its weak performance this year to tight margins on lending products, so this latest round of interest rate increases will be felt on the bank's bottom line.

The stock recovered to $52.50 by the end of last week, but analysts said further declines were likely this week.

There will also be many professional investors keen to sell at higher levels this week.

The collapse in the index over the past two weeks disrupted the selling plans of asset allocators from the United States, who were in the process of further reducing their weightings in Hong Kong stocks.

Now that the index is trading at better levels, overseas selling could continue to hold back the market.

One theme that may be played out over this week is the crisis in Korea.

US brokers report growing alarm among the retail investment community about the stability of Asia.

If the nuclear stand-off gets worse this week, some already frayed nerves may break and decide to sell their Asian stock holdings.

The Hong Kong market's liquidity compared with other Asian exchanges makes it an attractive point of first sale for foreign fund managers.

The feeling is that fund managers can lighten their Asian portfolio's most quickly and easily by reducing their Hong Kong holdings.

As the fall-out from the Jardines decision to pull out from Hong Kong subsides, the market will probably see the emergence of stocks to replace Jardine Matheson and Jardine Strategic in the Hang Seng Index.

The sell-off in the Jardine stocks to a point where they were trading at a price-earnings ratio of about 10 times was because index-linked fund managers were forced to reduce holdings.

The sell-off will probably continue in the short term, but to investors who do not care where the stock is listed, they represent a good buy.

Trading last week saw switching from Jardine companies into steady value chips such as Wharf, CITIC Pacific and Swire Pacific A.

Cheung Kong did not gain as much, but given its fantastic year-end results, there could be some increased buying in the counter this week.

Seapower Securities said it was inevitable that Cheung Kong's net profit would pass the $10 billion mark this year, making it an extremely attractive buy at a price-earnings multiple below 10 times.

Related company Hutchison Whampoa may also gain this week, as investors return to property companies.

The stock was one of the best-performing stocks last week, gaining 5.79 per cent to $32.

Stocks the market will be looking at to replace the two Jardine departures include Guoco Group, Sino Land and First Pacific.

Brokers do not expect the replacements to the Hang Seng Index to be made until next year, after Jardines is removed.

The market will now focus attention on other Jardine companies such as Dairy Farm and Hongkong Land, which could make the move to de-list next year.

Both stocks were sold down by investors last week in line with other Jardine companies, and may be due for a rebound this week.

Hongkong Land was the worst-performing Hang Seng Index property stock, dropping 11.49 per cent over the week to $20.80.

Dairy Farm lost only 1.77 per cent to close the week at $11.10.

Although overall sentiment remains weak, the market will be bolstered by the likely renewal of China's Most-Favoured Nation trading status and more good corporate results to be released this week.

On Tuesday Hopewell and New World Development will announce their results.