Hong Kong share prices are likely to extend gains as hopes for further rate cut next month by the US Federal Reserve will continue to boost sentiment, dealers said. However, they did not rule out prospects of more US subprime related volatility on Wall Street and worries of more macro-economic tightening measures in the mainland making investors cautious.
"I believe that the shares will hover at high levels as the market seems to have stabilised. Investors are also positive about a possible rate cut in the US," said Ben Kwong, head of research at KGI Asia.
Federal Reserve chairman Ben Bernanke hinted late Thursday that another interest rate cut may be needed to bolster the US economy. He said policymakers should pay particular attention to the impact of financial market strains on the rest of the economy and be "exceptionally alert and flexible" in policy actions.
Dealers said property and banking counters are likely to attract further interest ahead of the US Fed meeting on December 11. They expect a cut of 25 basis points, taking the total rate reduction to one full percent in 2007.
However, gains next week will likely be capped by caution over possible new macro-economic tightening measures in China, dealers said. "The China markets remain volatile because of worries over impending tightening measures," said Patrick Yiu, associate director at CASH Asset Management.
Nevertheless, Kwong believes the index will return above 30,000 points. For the week to November 30, the Hang Seng index is up 2,102 points or 7.92 percent, to 28,643.61. Kwong expects the index to trade to as higher as 29,000 points next week.