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Joseph Lo

Sentiment lifts but concerns over interest rates and oil prices keep investors wary

Stocks edged higher yesterday in thin trade as improving - although still cautious - sentiment led to selective buying in blue chips.

The Hang Seng Index closed up 40.09 points, or 0.3 per cent, at 13,602.35, after fluctuating between 13,538.4 and 13,619.87.

'Overall, sentiment is much better these days,' said Rexcapital Asset Management director Alex Wong Kwok-ying.

'I can see it in selective buying by some investors, who are no longer as bearish as they were a few weeks ago.'

Trading volume was light, however, with $14.28 billion worth of shares changing hands, compared with $17.56 billion on Wednesday.

Investors remained worried about the pace of interest-rate rises in the US as well as persistently high oil prices, Mr Wong said.

'In the short term, we're not going to break out of the trading range,' he added.

'The threat of rising interest rates and high oil prices are still bearish factors that will continue to overhang the market.

'But gradually, we're going to see investors become more positive. We're already seeing some selective buying  ... so we may have already seen the bottom.'

There was 'good support' for stocks at the 13,500-point level, with positive momentum increasing as the index moved towards 14,000 points, he said.

'We will see the market move to 14,000 or higher. But it won't be a one- or two-day thing, it will move up slowly over several weeks.'

Mr Wong expects continued range-trading by investors between 13,450 points and 13,700 over the next  weeks.

Heavyweight HSBC rose 50 cents, or  0.4 per cent, to $123.50 on expectations it will raise its prime lending rate today.

Hang Seng Bank  rose 50 cents, or 0.5 per cent, for the same reason, closing at $103.50.

Most local banks, apart from the big three - Bank of China, HSBC and Hang Seng Bank - have already raised their prime lending rates.

Phillip Securities research director Louis Wong Wai-kit said some smaller banks had been helped by their decision to raise rates last week, with investors expecting much better interest-rate margins going forward.

'Wing Hang Bank and Dah Sing Financial were star performers today,' he said.

Wing Hang Bank rose 70 cents, or 1.44 per cent, to $49.40, while Dah Sing put on $1.25, or 2.4 per cent, to $53.25.

Despite concern rate rises will erode demand for property, the property sub-index rose 0.2 per cent to 16,407.59 points. Cheung Kong was up 0.36 per cent to $70.50, while Henderson Land Development and Sun Hung Kai Properties were flat at $34.20 and $70.75, respectively.

Mr Wong said bargain hunters were looking beyond rate-sensitive sectors  towards telecommunications and shipping stocks.

Speculation that China Unicom may be broken up and its GSM operation absorbed by rival China Mobile helped propel the share prices of both companies for a second day yesterday. Unicom rose five cents, or 0.8 per cent, to $6.30, while China Mobile climbed 10 cents, or 0.39 per cent, to $25.85.

Hutchison Global Communications jumped 4.6 per cent to 45.5 cents.

Hutchison Telecommunications International, which fell 6.94 per cent on Wednesday on reports the planned share sale by its Indian mobile affiliate would be delayed until the second half, rebounded 6.72 per cent to close at $7.15 after analysts said the delay would not hurt its fundamentals.

Orient Overseas (International), the family firm of former SAR chief executive Tung Chee-hwa, extended its three-day run with a 4.94 per cent gain to $42.50, marking yet another new high.

It traded at $6.15 just two years ago.

'Shipping stocks will continue to do well these days, as they are supported by the belief that China's hunger for raw materials will benefit them,' Mr Wong said.

China Shipping Development, the country's No 2 bulk carrier, rose 4.29 per cent to $7.30.



Caution rules as selective buying props up blue chips