Hong Kong share prices should head to calmer waters next week after a dismal January so far, but worries over heavyweight HSBC will continue to dominate, dealers said. For the week ending January 16, the benchmark Hang Seng Index closed at 13,255.51, down 7.8 percent. The previous week it had lost 4.4 percent.
Much of the poor performance has been driven by banking giant HSBC on worries it will have to raise more capital and could slash its dividend, as it suffers the fallout from the global credit crunch.
Francis Lun, general manager at Fulbright Securities, said Europe's largest bank would continue to dominate the bourse. "The story is still HSBC, I think the banks are trying to spite each other," Lun told AFP, referring to two pessimistic assessments of the bank's stock price. HSBC dropped 14 percent during the week, ending at 64.20 Hong Kong dollars, after Morgan Stanley analysts said they thought it needed to raise new capital and cut its dividend in half. Goldman Sachs spread more gloom, cutting the stock to sell from neutral and slashing its target to 49 dollars from 77. But Lun said HSBC was still in a relatively strong position, although he stopped short of saying he was bullish on its stock.
"HSBC will surprise a lot of people when it announces its results in March," Lun said, adding he expected the market to stabilise around 13,000 points next week.
Lun added that he expected volumes to be low ahead of the Lunar New Year the following week, but other dealers were less certain about the prospects for HSBC. "Weakness in HSBC is likely to persist," Peter Lai, director at DBS Vickers, told Dow Jones Newswires.
"I won't suggest investors buying HSBC until concerns over its potential fund-raising are settled."