The proposed US interest-rate hike by the Federal Reserve later this week is not expected to have much of a detrimental impact on the Hong Kong stock market, although some cautious investors may choose to stay away for a short period of time.

Analysts say that most investors have already digested news of the interest-rate increase and have discounted it. Observers expect the Federal Reserve to push up interest rates by 25 basis points at its meeting during June 29-30.

Market watchers also say that concerns about Hong Kong banks raising interest rates in tandem with the US remain largely unfounded. The market is also warming up to statements made by the mainland last week that an interest-rate increase was not imminent.

"Banks in Hong Kong are unlikely to follow suit and raise interest rates immediately, therefore rates will remain steady, at least for a while," said Marco Mak, head of research of Tai Fook Securities.

Meanwhile, market trading remained thin yesterday with a turnover of only HK$11.1 billion. The benchmark Hang Seng Index closed slightly higher by 0.07 per cent or 9.08 points at 12,194.60.

Among the prominent traded stocks was blue-chip Cheung Kong Holdings which gained 1.33 per cent to close at HK$57.25. The property giant said that it sold 3,500 units in Hong Kong in the first half, a 75-per-cent increase over the same period last year when the territory was in the grip of the SARS epidemic.

Other property firms like Henderson Land and Sun Hung Kai Properties also performed well, gaining 2.48 per cent at HK$33.1 and 1.19 per cent at HK$63.75 respectively.

"The market seems to find good support above the 12,000 level, you actually see very little profit-taking," said Mak. Most analysts say the market will probably reach the 12,500 level by the end of the week.

The H-share index went up by 1.51 per cent to close at 4,287.15. Analysts say that mainland stocks, especially, basic-materials companies, have rebounded lightly as investors are confident of the Chinese Government steering the economy to a soft landing.

The top winners yesterday included Angang New Steel which gained 6.6 per cent at HK$2.825 and Sinopec Shanghai Petrochemical which gained 5.1 per cent to close at HK$2.575. Li Ning, on its debut yesterday, jumped 9.3 per cent to HK$2.35 from its initial offer price of HK$2.15 per share, after raising HK$530 million in its IPO .

Observers say that the steady performance was largely due to the expected release of details for the Qualified Domestic Institutional Investor (QDII) scheme which will allow mainland institutional investors to purchase securities in overseas markets.

"Although details on the QDII are still unknown and may take some more time to surface, this is good news to the local markets," said Mo Chen, analyst at Sun Hung Kai Research.

The Hong Kong market could very well see a huge chunk of some US$8 billion flowing from the mainland.

(HK Edition 06/29/2004 page17)