Clouded by the uncertainty of the US economy, the Hang Seng Index (HSI) yesterday performed sluggishly, dipping 0.13 percent to close at 24, 249.

Tracking the fall of the US market, together with the negative sentiment over the outlook of the mainland economy, the HSI yesterday lingered without clear direction.

The index ended at 24,249, downed 32.5 point, while the China Enterprises Index, the index mirroring the performances of mainland companies, went up 0.34 percent to close at 13,374.

Market turnover of the mainboard remained stagnant, which stood at HK$60 billion.

Average daily turnover underwent substantial shrinkage over the past four months with the prudential view of retail investors.

According to the HKEx figures, average daily turnover of the equity market reduced from HK$120 billion in January to HK$87.4 billion.

Analysts said the stalemate is likely to continue over the coming weeks as the shrinkage of daily turnover severely hit local brokerage firms.

Ricky Tam, chairman of Hong Kong Institute of Investors, pointed out the brokerage firms will face difficulties if the daily turnover remains at HK$60 billion or below.

Incomes of small- and medium-sized brokerage firms heavily count on the commissions of the trading of retail investors.

"The medium-sized brokerage firms especially felt the heat because many of them spent extravagantly to expand their businesses last year when the market was on the bullish run," said Tam.

He predicted that the situation would be sustainable in weeks ahead. "Retail investors lack confidence in the market. I believe they will adopt wait-and-see approach in May and July."

He said the impasse would not end until the three mainland-telecom stocks including China Netcom, Unicom and Telecom resume for trading and the picture for the mainland telecom restructure get clearer.

Enlighten Securities and Futures Executive and Vice-president Ricky Cheung admitted that the companies businesses have been affected by the reduction of transaction.

"The stock market always has ups and downs. We've got used to it and don't make things over-pessimistic," he said.

But Cheung said that the index has already plunged below the 50-day technical barrier, which might test 23,600-mark in the short run.

Alex Tang, research director of Core Pacific - Yamaichi, was wary about the prospect of mainland stocks, saying the impact on the H-shares would be deepened if the central government continues to adopt tightening monetary policy.

(HK Edition 05/29/2008 page2)