BROKERS expect the local stock market to rise further this week following the return of international players showing strong buying interest. However, the index will meet resistance at 9,800 points as it has risen more than 15 per cent in the last two weeks, brokers say. The decision by local banks to raise interest rates by half a percentage point has been interpreted as a positive signal by the market because it has lessened the likelihood of higher interest rates in the second half of the year. The news of Morgan Stanley increasing the market weighting of Hong Kong shares was another boost to the index. Heavy turnover indicated the change of market sentiment. Renewal of China's most favoured nation (MFN) trading status by the US is top of the market's agenda and brokers are positive about the issue as both countries cannot afford to put their trade positions at risk. In the longer term, interest rates, MFN, property prices and the Sino-British negotiations on the new airport are major factors facing the stock market. Edward Chan, sales director of Nomura International (HK), said there were positive indications on the direction these four factors would take. ''If all these factors turn out positively, the market will reach 12,000 points,'' said Mr Chan. Blue-chip property counters look attractive over the long term since they are trading at a discount to their net asset values. Under a rising interest rate environment, banking stocks and utilities are not attractive. However, some construction companies which have the licences and expertise to secure contracts for the new airport projects are at bargain levels. Seapower Securities recommends a buy on Kumagai Gumi, Paul-ITC, B+B Asia and UDL Holdings. Their dismal share prices have fully or overly discounted uncertainty while their earnings are on the verge of a rebound. The Hang Seng Index finished at 9,631.63, up 461.91 for the week. The Sino-British talks on the financing for the new airport did not come up with any accord last Friday. As a result, the index dropped slightly before the market closed. But with HSBC and Hang Seng Bank at the vanguard, the index finished 276.65 points up on the day. On the week, the index was up 5.4 per cent and, on the month, it is up 4.45 per cent. The market remains 18.98 per cent down on the year to date, but 35 per cent up on the last 12 months. Turnover was a healthy $7.08 billion, the highest turnover in eight weeks. Investors have turned to banking stocks; HSBC rose $4 to $90.50, while Hang Seng Bank was up $2.50 to $56.50.
