Hong Kong shares up 0.41 percent after six days of losses

Hong Kong stocks climbed 0.41 percent on Wednesday after six days of losses, in what traders said was a technical rebound from oversold conditions. Traders said worries about hot money flowing out of the market and concerns about higher interest rates this year have undermined sentiment, sparking a sell-off in the last few sessions. Hong Kong's blue chip Hang Seng Index rose 0.41 percent, or 56.06 points, to 13,565.31. Turnover was HK $20.7 billion (US $2.7 billion), compared to HK $19.5 billion at Tuesday's close.
The Hang Seng's 14-day relative strength index is 14. A reading below 30 usually signifies oversold market conditions.
"The market was extremely oversold and is still oversold driven down mainly by fears of a sudden reversal of fund inflows. But there is no hard evidence of hard outflows, so we are expecting a comeback," said Alex Tang, research director at Core Pacific-Yamaichi International (HK) Ltd.
He added that they expect the blue chip Hang Seng Index to end the month within the 13,800 to 14,000-level range.
Hong Kong Chief Executive Tung Chee-hwa said in his annual policy speech on Wednesday that the city's unemployment rate dropped to 6.7 percent by the end of 2004, down from a record 8.7 percent in spring 2003.
Tung added that the economy grew 7.5 percent in 2004, a sign that Hong Kong's economy is on track to recovery.
Daniel Poon, head of Hong Kong and China equities at ABN Amro Asia, said the direction of the US dollar would have a significant effect on the Hang Seng in the long run.
"If the renewed fall of the US dollar is sustainable, then obviously that is positive for our market," Poon said.
A weak dollar is usually viewed as a positive factor for Hong Kong stocks. The local currency is pegged to the US unit, making stocks look comparatively cheap when the greenback flounders.
Semiconductor Manufacturing International Corp (SMIC) fell 1.26 percent to HK $1.57 after Morgan Stanley cut its 2004 and 2005 earnings forecasts for SMIC by 39 percent and 17 percent respectively, citing oversupply in the sector amid an industry downcycle.
Standard Chartered shed 0.73 percent to HK $136, extending Tuesday's 1.79 percent fall after Lehman Brothers cut its price target for the Asia-focused bank to 940 pence a share from 1,015 pence on the back of the bank's plan to buy a Korean bank for $3.3 billion.