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Hong Kong stocks seen choppy, eye FOMC

HONG KONG: Hong Kong stocks are expected to be volatile this week with robust technology shares tugging against sinking "old economy" issues as a key meeting over U.S. interest rates and Taiwan's presidential elections approach.

Analysts predicted the Hang Seng Index to trade in a wide range of 17,500 to 18,200 during the week, with mounting rate jitters giving investors incentive to take profits.

The blue-chip benchmark index ended up 194.83 points or 1.10 percent at 17,831.86 on Friday, up 3.1 percent on the week.

"It will be choppy trade this week ahead of the FOMC meeting and what happens on Wall Street," said Nitin Parekh, Asia strategist at CS First Boston, referring to the U.S. Federal Open Market Committee meeting on March 21 to decide on U.S. rates.

The FOMC is widely expected to raise the Federal funds rate to six percent from 5.75 percent to pre-empt inflationary pressures.

"The interest rate fears are definitely a factor, or HSBC wouldn't be where it is," said James So, director of research at Asia Financial Securities.

Banking giant HSBC Holdings gained 0.5 percent on the week to HK$87.75, but has dropped 19.4 percent from a high of HK$109 in late December.

Tension between mainland China and rival Taiwan ahead of the island's presidential election on March 18 could weigh on an otherwise well-supported broader market, analysts said.

"The market may have a chance to revisit highs, barring heightening of tension between Taiwan and China," said James So, director of research at Asia Financial Securities.

The three leading Taiwan candidates took a conciliatory line towards Beijing on Friday and tried to reassure voters they were best suited to mend fences with China, which has said it would invade the island should it delay reunification talks.

Technology and telecom stocks and China-related red chips were expected to give support to the market, with investors switching to Internet-related counters from traditional bricks-and-mortar issues and rate-sensitive banks and properties.

"Like the Dow and the Nasdaq, there will continue to be a divergence here, with focus to remain on certain high-tech stocks," said an investment strategist at a local brokerage.

On Friday, the blue-chip Dow Jones Industrial Average fell 81.91 points, or 0.82 percent, to 9,928.82. The tech-heavy Nasdaq ended up 1.76 points at 5,048.62.

Hong Kong's Growth Enterprise Market (GEM) second board would be volatile as investors switched between hot new Internet plays with Sun Hung Kai Web unit SUNeVision listing on March 17.

Chinadotcom Corp unit hongkong.com sank 19.26 percent or HK$1.30 to HK$5.45 in its second day of trade on Friday after hitting a low of HK$4.47 earlier and a high of HK$9.10 on its debut. Its offer price was HK$1.88.-Reuters