Hong Kong shares are likely to trade in a narrow range this week as investors stay on the sidelines ahead of the US Federal Reserve meeting on Wednesday, dealers said on Friday. "Investors are concerned about the interest rate hike. If the US raises its rate this time, this will affect the funds coming into Hong Kong," said DBS Vickers Director Peter Lai.
Foreign funds have provided much of the gains made by local shares at the end of last year because of a weak US dollar. If the US dollar strengthened against major currencies following an anticipated rise in US interest rates, US assets would become more attractive for global investors looking for more attractive returns.
He said market sentiment would remain cautious in the short term. He believed sentiment has reached a bottom but it lacked the momentum it needs to push higher.
However Herbert Lau, head of research at Celestial Asia, said the market might actually rally, a move traditionally seen ahead of the Lunar New Year, as long as there was no negative news. Lau expected further buying interest in China-related stocks following strong 2004 economic growth figures from the mainland earlier this week. He believed the market would face strong resistance for the main index between 13,500 points and 13,800 points.
For the week to January 28, the key Hang Seng Index rose 169.04 points or 1.25 percent to 13,650.06.
Average daily turnover was 16.6 billion Hong Kong dollars (2.1 billion US dollars) compared with 17.14 billion Hong Kong dollars a week earlier.
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