Analysts don't see a bearish trend yet
Despite three 600-point-plus daily plunges in 10 days, analysts are reluctant to label the Hong Kong market as bearish.
The recent losses are not the beginning of a bearish trend, said Ronald Wan, managing director and head of investment of Bank of Communications (International).
"The Hang Seng Index has gained a lot this year. It's time for a correction. We are not pessimistic as corporate earnings are quite decent," he said.
Raymond So, a professor of the Chinese University of Hong Kong, advised investors not to be jittery. "The fundamentals remain strong. The impact of the yen carry trade and subprime mortgage woe are expected to be temporary."
The benchmark index stood at 21907.99 on Tuesday, dropping over 1,500 points from its peak on July 24. The weakening US market, suffering from subprime mortgage problems, has affected Hong Kong investors' sentiment.
The Hong Kong market would continue to be volatile in the coming days before strong earnings from big companies boost investor confidence, said Patrick Shum, chief portfolio strategist of Karl Thomson Securities, adding the next support level for Hang Seng Index would be 21000.
"It's more like a medium-term correction and the market will rebound in several weeks," he said.
The A-share market can also back up Hong Kong as the former has defied a global downturn by hitting new highs in past days, analysts said.
"We don't believe Hong Kong and mainland markets would go apart too much. The H-share market could be boosted by the A-share rally," Ronald Wan said, adding Shanghai now has a bigger influence on Hong Kong than before.
Many mainland giants such as the Industrial and Commercial Bank of China, Bank of China and China Life trade shares in both Shanghai and Hong Kong. A-share prices of these dually listed companies were 67 percent higher than their H-share counterparts on Tuesday, a historic high.
"Hong Kong investors would see that H shares are undervalued compared with A shares, and that may encourage them to buy H shares," said Wan.
Qualified domestic institutional investor (QDII) scheme would be another catalyst for Hong Kong, Patrick Shum said.
(China Daily 08/09/2007 page15)
