HK share rally fails to show

The share rally which was expected to greet Hong Kong's handover to Chinese rule has failed to materialise. Instead the first days of trading in the new era have ended with the blue chip Hang Seng Index slipping by almost 374 points, a loss of 2.46 per cent.

Yesterday's price fall was greater than on the first day of trading with the index dipping below the 15,000 points mark to end the day 231 points down at 14,823.

Brokers cited concern over the new government's plans to curb property speculation as the cause for the price fall. With the bulk of the Hong Kong stock market underpinned by property assets, any hint that prices may be forced down is always taken badly.

However, there was also evidence of considerable profit-taking as the stock market had risen to record levels before the three-day break which marked the handover period.

On the last day of British rule, the Hang Seng Index closed at a record high of 15,197 points. Speculation in the market has been that Chinese- backed investors and tycoons close to the new regime would help stage a rally to mark the new era.

If they were trying to do this, their efforts became lost in an avalanche of trading which took market turnover close to record levels. Yesterday HK$22.51bn (pounds 1.7bn) worth of shares changed hands, down on the HK$24.5bn which were traded on Thursday.

Although there may have been some Chinese disappointment over the failure of the market to stage a post-handover rally, none of the analysts were viewing the month's performance as a vote of no confidence in the new administration.

Indeed, the shares which have best maintained their value have been the so-called red chips which are companies controlled by Chinese interests.

The shares which performed best in the past two days were counters rumoured to be the subject of interest by Chinese entities.

Yesterday it was the turn of three construction companies to be moved by rumours which sent their prices soaring.

Increasingly the Hong Kong market is being moved by companies who are perceived to be well connected with the new order, or likely to be so.