THE stock market is in for another testing time this week as it ponders life below 8,000.
The key factor may still be Wall Street, but the driving force will be the mutual funds.
Pressure coming through from some of the big American mutual funds is intense, and explains why Wall Street has fallen three per cent since the sell-off began and Hong Kong is down closer to 18 per cent.
Faced with redemptions from unhappy customers, they are being forced to raise cash through the market at a time when liquidity is very tight.
This has made for an appalling market in Hong Kong over the past two weeks, and there is no sign yet that the selling overhang will clear.
The reason is that there has not been much selling actually going on. The market has fallen through the floor, but volumes have been very small, averaging less than $4 billion.
