THE market could be in for a strong rebound this morning following a surprising rally on Wall Street last Friday. Analysts anticipate an index jump of 100 to 150 points at the opening. The Hang Seng Index closed last week at a 14-month low of 8,221.57. It fell further in London on weak sentiment, with the Hang Seng London Reference Index shedding a further 42.18 points to close at 8,179.39. That was before Wall Street staged a spectacular late session rally, pushing the Dow Jones Industrial average up 1.21 per cent to close 44.75 points up. The reason for the rally was that bond yields dropped to their lowest level in more than a month. The benchmark 30-year bond yields dropped below eight per cent to close sharply lower at 7.91 per cent. Wall Street analysts said this was partly technical but it also reflected a belief that an end was in sight for rate increases. A rate rise of 0.5 per cent is likely in January and there will probably be a further 0.5 per cent rise in March. By then prime interest rates would be around 9.5 per cent which should be enough to cool the economy. Although recent statistics show growth is still strong, inflation so far has remained steady, which is a good sign. Statistics also lag the actual state of the economy, and the Federal Reserve would have to be concerned that prime rates above 10 per cent could send the economy suddenly into reverse, which definitely is not on the agenda. Another reason for the Wall Street rally was an anticipated increase in earnings. This, however, will not have any effect on Hong Kong where earnings are showing signs of slowing. But given the oversold state of the market, the bulls if there are any, should come into the market today. There may also be some short-covering on fears the index could experience a sudden and major bounce. Friday's fall was deceptive because there actually was a fair degree of buying from longer-term investors. It was just that the weight of mutual funds money flowing out made the market fall. But even mutual funds will want to wait for better prices before they continue selling, which gives some comfort that next week may be better for the index than a lot of bears would like to have us believe. The index now is trading on a price-earnings multiple of under 11 times which is attractive compared with other markets. Once the bond markets settle down, so too should the Hong Kong stock market. Property stocks such as Sun Hung Kai Properties and Cheung Kong, which were heavily marked down last week, should be among the best performers.