Hong Kong share prices may trade in a narrow range next week being held back by continued worries that China may impose new measures to cool its economy and markets, dealers said Friday.
They expect to see selective buying in the local stocks, switched from the China-related shares following the big drop on the mainland bourses.
"A lot of funds have switched from China shares to Hong Kong shares. China stocks will not be doing so well in the short term because China might tighten monetary policy," said Ben Kwong, head of research at KGI Asia.
"The funds will be focusing on the local stocks, especially in properties, and that will last for a while," he added. Chinese share prices suffered sharp drop this week on renewed institutional selling of banks and real estate developers.
Dealers said financial and property stocks were heavily sold amid ongoing investor jitters that the market is overbought following a series of official warnings that sustained gains have put stocks at risk of a major correction.
Kwong said he expects further correction on China stocks in the short term until the end of the Lunar New Year in the middle of this month.
Conita Hung, head of research at Delta Asia Securities, said investors will also focus on key economic data and earnings announcements coming out from the US next week for leads.
"Investors would like to see the US economy remain strong, although they wouldn't want it to be too strong that would prompt the Fed to raise interest rates," she said.
"For the most part next week, the local market will track Wall Street's performance. I expect some selective buying ahead of results announcement by Esprit and Bank of East Asia," Hung added.
For the week to February 2, the benchmark Hang Seng Index was up 282.55 points or 1.4 percent at 20,563.68. Kwong expects it will trade within a range of 20,300-20,700 points next week.
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