Hong Kong shares are likely to move sideways in cautious trade this week on prevailing concerns over higher interest rates, fund outflows and rising oil prices, dealers said. However any falls would be partly offset by expected strong earnings from companies due to report earnings in the coming week. 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.
"There is a big chance that interest rate will be raised. Although it might not have much impact straight away but it will weigh down sentiment," Herbert Lau, head of research at Celestial Asia, said.
Concerns over an interest rate hike and high oil prices would continue to dominate the market next week, he said. However, any losses would be somewhat capped by expected positive earnings from some companies next week. Companies reporting results next week include full year earnings from China Power Monday, first half earnings from New World Development Tuesday and interim earnings from Henderson Land on Thursday.
"Investors are taking a wait-and-see attitude. The overall sentiment is cautious," he said. News that Hong Kong's leader Tung Chee-hwa had resigned Thursday two years before the end of his term was expected to have little impact on the market this week.
Lau expected the main index to trade between 13,700 points and 14,000 points. For the week to March 11, the key Hang Seng index rose 160.15 points or 1.2 percent at 13,890.93.
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