The performance of Hong Kong share prices will largely depend on whether China will hike its interest rate over the weekend to cool its economy and curb inflation, dealers said on Friday.
They said investors will be kept on the sidelines by market talk that interest rates in China might be raised as early as this weekend by 27 basis points as the consumer price index touched an 11-year high in November. "We will have to look at China's interest rate decision for market direction next week," said Castor Pang, strategist at Sun Hung Kai Financial Group.
"If Beijing raises interest rate, then we may see the market perform better; if not, it will stay quiet," he added. The central bank is widely expected to raise its benchmark one-year lending rate by at least 27 basis points before the year ends, after increasing it five times this year to 7.29 percent.
Dealers said the lack of market direction and uncertain external factors including the sustained worries over the subprime mortgage crisis and the global credit crunch will continue to weigh on sentiment. In the latest subprime revelation, US bank Citigroup Inc said it plans to assume control of the seven structured investment vehicles to help them repay their debts.
This week, the US central bank trimmed its key federal funds interest rate by 25 basis points, less than some expectations for a cut of 50 basis points. For the week to December 14, the benchmark Hang Seng Index lost 4.40 percent to 27,563.64. Pang said it was difficult to predict how it will trade next week and expects the index to range between 26,800 and 27,600 points.
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