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Strategies & Market Trends : HONG KONG -- Ignore unavailable to you. Want to Upgrade?

To: Jim McMannis who wrote (2509)	10/30/1998 10:26:00 AM
From: Tony van Werkhooven	Read Replies (1) \| Respond to of 2951

Jim- the following is from the SCMP, reporting on Friday market activity. Seems to indicate that funds are returning to the HK market: 10,154.94 (+223.48) Updated at 4.55pm: REUTERS Hong Kong stocks closed higher on Friday as cash-rich foreign funds streamed into the market, putting sidelined money back to work, brokers said. The Hang Seng Index gained 223.48 points, or 2.25 per cent, to end at 10,154.94, its highest close since May 4. The blue chip index earlier hit a high of 10,254.35 before running into light profit-taking, brokers said. "Fund managers have to come into the market," said Alex Tang, research director at Core Pacific-Yamaichi International (HK). "They have raised their cash position since March and April this year," he said, adding funds were sitting on cash positions of over 30 per cent of their total portfolios. Brokers said investors were underweight Hong Kong as well as the region and did not want all their eggs in one basket. "They are not so certain whether the US rally will continue," said Frederick Tsang, head of research at DBS Securities. Mr Tsang said investors were looking for clues from Wall Street as the Dow industrials face a critical level of around 8,500. A series of Reuters polls of 49 fund managers and strategists showed that investors in Britain, Japan and continental Europe were all increasing exposure to emerging markets in Asia, encouraged by falling interest rates and a weaker dollar. US investors' Asia equity allocation was unchanged. Turnover finished at a healthy $8.73 billion against Thursday's $8.59 billion. Brokers said a strong overnight performance by Wall Street boosted sentiment as the Dow industrials rose 1.47 per cent to 8,495.03. A firm Japanese yen provided additional support with the US dollar briefly dipping below 115 yen against its close of 116.78/88 yen in New York on Thursday, they added. Lower interbank rates also inspired market bulls and the benchmark three-month Hibor rate slipped to 6.98125 per cent at Friday's fixing against 7.48026per cent at the same time on Thursday. "At this level the market is discounting a very big drop in interest rates," said Mr Tsang, adding the market was factoring in prime rates to fall 150 basis points. The Hang Seng Index has risen 28.8 per cent in October and brokers said the market's direction would depend on the continuing flow from foreign funds. "With foreign funds' participation it can easily be driven up another 1,000 or 2,000 from the current level," said Mr Tang. He said 10,000 was fair value for the blue chip index, based on EPS (earnings per share) growth for 1998. But as the end of the year nears, investors will start looking at earnings for 1999 which give the index a fair value of 12,000, Mr Tang said. John Lai, chief investment officer at Nikko Global Asset Management (HK), said the market was overbought. "In the medium term I'm still a bit negative on the Hong Kong market," Mr Lai said. "It has performed a lot already, the upside is very limited." Mr Lai said hopes of rate cuts were discounted and there were few signs of fundamentals improving. He added that selling pressure was low as many institutional investors were already underweight. "For the long-term funds, they are not going to reverse their strategy just because of one or two months' upside," Mr Lai said. Brokers said the market's movement was exaggerated by a reduced free float after the Government's intervention in the stock and futures market in August, when it bought $118 billion worth of shares. Index heavyweight HSBC Holdings gained $2.00 to $177.50. Swire Pacific was the flavour of the day, adding $3.30 to $41.10, and brokers said the stock had been ignored during the recent market rally. The government's 12.28 per cent stake in Swire Pacific exaggerated the rise, they added. China plays rose in line with the general market trend. The red chip China-Affiliated Corporations Index climbed 1.66 per cent to 925.47 while H-shares inched up 0.48 per cent to 421.29. Nikkei-225 close