HONGKONG STOCK MARKET, June 20-24, 1988
Yanked and Yenned, Back and Forth
Monday
An encouraging opening in the morning pushed the Hang Seng Index up some 30 points, but the Market was dragged down following disheartening news from Japan.
The Nikkei Stock Average had been achieving record gains over the previous few weeks, but fears of increased inflation in Japan and the US prompted a spate of profit- taking.
The cautious sentiment in the land of the rising yen was mirrored in Hongkong, where the bullish atmosphere carried over from the weekend was dissipated by investors unloading scrip.
Further consolidation was expected to follow, but many brokers said that this was no bad thing and the Hang Seng Index was predicted to approach the 2,800- point level in the following weeks.
But the drought in the US was having a negative effect on Wall Street, where the prospect of a rise in price of food-stuffs as a result of the crop failure triggered new
worries of inflation.
Soybean prices were surging due to the drought, which was said to be the worst since 1934, and wheat and maize prices followed suit.
The Dow Jones Industrial Average managed a gain of about 10 points on the previous Friday, but punters in Hongkong seemed to disregard events in New York in preference to those in Tokyo.
At the summit of the 7 leading industrial nations. ('G7') in Toronto, Canada, Japan's Deputy Minister of Finance for International Affairs, Mr Toyoo Gyohten, said that inflation does not constitute an immediate threat that would require a change in monetary policy.
But brokers in New York remained apprehensive, fearing a hike in interest rates, and reports that the G7 leaders would tolerate higher interest rates compounded fears of tighter credit.
Overall, the G7 leaders played down fears of inflation and concentrated on their victories instead. They said that
their message was one of optimism and confidence for the future.
In Hongkong, The Hongkong and Shanghai Banking Corporation's latest Economic Report forecasted that the gap between property prices and income levels would widen due to increased speculation on the property mar-
ket.
If the price of property continues to soar, and interest rate increases are implemented, a decline in the afforda- bility for the home buyer would result, creating an imbal- ance in the demand and supply situation, the report said.
The report also warned of the effects of a turn-around in the property market sentiment, pointing out the high loan exposure of the financial sector to property financing.
At the close of trading, the Hang Seng Index had lost almost all of its early gains, and came to rest at 2,719.06, a rise of 1.04 points.
The Hongkong Index closed 0.95 points up from its previous close to stand at 1,800.67.
Turnover was 'respectable' for a Monday, brokers said, with the final tally coming to $HK1.747 billion, up $HK41.81 million from the previous Friday.
The Utilities Sector benefitted from the announce- ment that the Hongkong Telecommunications Company Ltd had posted a Net Profit of $HK2.99 billion.
A number of analysts suggested that the Utilities Sec- tor would prove to be more attractive to investors than Property or Finance in the near future.
It was believed that the Property Sector might soon be reaching its peak, and punters were be looking elsewhere to put
their money.
Other analysts, however, said that moving to Utilities could be translated as a defensive manoeuver as opposed
to speculation.
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