Hong Kong share prices are "ridiculously" over-priced and will likely undergo a correction, following spectacular performance in the past month, dealers said.
The market hit an intraday low of 19,387 on August 17, but since then has risen more than 5,000 points, mainly powered by China's announcement on August 20 of a plan to allow mainland investors to buy Hong Kong stocks directly.
Francis Lun, general manager of Fulbright Securities, said the "explosion" in share prices was unsustainable and singled out the huge rise in market operator Hong Kong Exchanges Clearing Ltd (HKEx).
"The rise in HKEx means somebody, a big investor, is buying HK Exchange shares in the open market, which has triggered an explosive rise," he said.
"I think the markets will be righted next week because of profit taking when sanity returns. People here have gone out of their minds.
The Hang Seng Index closed Friday at a another record of 25,843.78 points. For the week, the index was up 945.67 points or 3.8 percent.
Another dealer, who did not wish to be named, also said that retail investors should refrain from buying at current levels.
"To be honest, rational investors won't buy at such a high level as the market has been strongly overbought and did not see any correction after rising more than 5,000 points in a month," he said.
Lun added that the long-awaited implementation of the individual investor scheme, probably after the October 1 holiday, will likely cause another peak.
He added that Hong Kong's economy remained in good shape, although there were concerns for overheating in the mainland economy, which need "further and stronger austerity measures."
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