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HK equities to extend slide on rate concerns

HONG KONG: Hong Kong stocks are expected to slip further this week, testing support at 14,800 points amid nagging uncertainty over U.S. interest rates, analysts said.

"I see it tending to drift lower," said Stephen Brown, head of research at Kim Eng Securities.

"You've got Chinese New Year, you've got Greenspan and a lack of direction in the markets. I can't see markets doing a lot until Greenspan does what he's going to do," he added.

The Federal Reserve's Open Market Committee meets on February 1-2, giving the Hong Kong market a day to react before it closes again for Chinese New Year holidays on February 4 and 7.

U.S. Federal Reserve Chairman Alan Greenspan will testify on monetary policy to the Senate Banking Committee on Feb 17 and 23.

Hong Kong's blue chip Hang Seng Index ended down on Friday for a third straight day, shedding 106.90 points or 0.70 percent to 15,108.41. It lost 433.82 points or 2.79 percent on the week.

Brown said if the index breaks through support at 14,800, it will quickly fall to 14,200.

"At 14,800, the market looks quite interesting on a two to three month view and at 14,200 there's some real value around," adding that HSBC Holdings was beginning to look attractive at HK$90.50.

The index is likely to become vulnerable to swings on Wall Street, which could be swayed by further fears of inflation or any corporate earnings surprises.

In New York on Friday, the Dow Jones Industrial Average slid 99.59 points or 0.88 percent to 11,251.71, while the Nasdaq Composite climbed 45.89 points or 1.10 percent to a new high of 4,235.40.

Celestial Asia Securities market analyst William Li said he expected further weakness and volatility in the short term ahead of the FOMC meeting.

"It may test its year 2000 low again," Li said of the Hang Seng Index, which dipped to 14,763.97 on January 6.

Greenspan is scheduled to testify before the Senate Budget Committee on Thursday and data on U.S. gross domestic product growth for the fourth quarter is due to be released on Friday, with economists predicting a robust 5.1 percent year-on-year growth.

HSBC Securities institutional sales manager Jerry Pang said he expected the index to trade in a relatively narrow range of a few hundred points on either side of 15,000.

Investors may try to move later in the week in anticipation of a Chinese New Year rally, but analysts said gains which typically follow the holiday may not materialise this year.

"It's going to be tough," said Miles Remington, head of Asian sales trading at SG Securities. "People may position themselves ahead of the new year, but in terms of a traditional new year rally, it doesn't look like it's going to happen at the moment."

The onset of the bank reporting period later in the month could provide direction, with any positive surprises possibly sparking another rally, brokers said.

Hong Kong Monetary Authority deputy chief executive David Carse on Friday said he expected local banks to produce "subdued" profits for 1999, saying that there had been some moderation in the growth of aggregate bad debt charges compared with 1998, but that some banks continued to see sharp increases in provisions.-Reuters