Hong Kong shares are likely to move lower this week as prevailing concerns mount over high interest rates and rocketing oil prices, dealers said. The US Federal Reserve is expected to raise its interest rate again when it holds its policy meeting next Tuesday. The banks of Hong Kong, whose currency is pegged to the dollar, did not track the last several rate hikes in the US but are widely expected to raise its rates this time around by as much as half a point.
Some institutional investors have been moving funds out of the city to take advantage of the higher yield that US dollar denominated assets offer.
This fund outflow has cut excess liquidity in the banking system and caused a spike in interbank rates, raising fears that banks may raise their own interest rates soon which would curb corporate growth.
"The market this week won't be very good. Oil prices are rocketing and interest rates are likely to go up because Hong Kong banks lag so much behind," said Ben Kwong, head of research at KGI Asia.
Concerns over high oil prices would continue to dominate the market next week, he said.
World oil prices eased to 56.30 dollars on Friday, a day after surging to fresh record high points nearing 58 dollars in New York amid the backdrop of robust global demand.
The rate-sensitive property stocks likely will be the hardest hit when lending rates go up in the territory, while oil-related stocks will perform well on the rising oil prices.
Kwong expected the main index to trade between 13,600 points and 13,950 points. For the week to March 18, the key Hang Seng index fell 62.56 points or 0.45 percent at 13,828.37.
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