Hong Kong shares are likely to face yet more volatility next week, as dealers warn there could be a "deep correction" on the market. The benchmark Hang Seng Index finished above the 30,000-point mark for the first time Friday after a roller-coaster performance that saw the index recover after suffering its biggest one-day fall in seven years earlier in the week.
Peter Lai, sales director DBS Vickers, says he remains very wary of the turmoil and that investors should remain vigilant. "I am very cautious about the market. There seems to be lots of funds coming into Hong Kong. There seems to be some funds driving up the market to force it up, until the shares are overpriced," he said.
Lai added that he believed that some speculators, who have expected a sudden fall in the market, could be caught out when some of their short trading has to be settled Tuesday. "People have been betting against the market, and they are meant to have to settle next week. The volatility in the next week will be very high," he added.
Lai said the market remained very sensitive to any news coming out of both the United States and China. He said that key economic data and results in the US this week and an expected hike in interest rates in the mainland could cause havoc.
"These figures individually will affect the Dow Jones, as well as Hong Kong," he said. "There is speculation here that the interest rate move will be much higher than expected, because the current inter bank rates in the mainland market are going very high.
"There are lots of funds flowing into Hong Kong, many of them have a hedged position already. I think the correction will be very deep." The Hang Seng index closed Friday at 30,405.22, up 940 points or 3.19 percent over the week.
The index has enjoyed a spectacular few months of rising prices since a still-unrealised scheme to allow mainland investors to buy Hong Kong equities for the first time was unveiled in August, causing concerns a bubble has developed.
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