Market Outlook

Hong Kong market might rebound today. Hong Kong stocks plummeted by more than 200 points last Friday. The benchmark Hang Seng Index opened by 413 points lower and fell below 19,000 points subsequently. During the afternoon session, the index remained weak and further tumbled to its day-low at 18,622 points. However, Hong Kong stocks erased some of their losses as approaching the closing hour amid the strong buying momentum. The Hang Seng Index eventually closed at 18,951.85 points, plummeting by 249.08 points or 1.30%. The China Enterprises closed at 9,577.18 points, down by 123.69 points or 1.28%. Market turnover increased slightly to 657.57 billion. In summary of last week’s performance, the Hang Seng Index declined by 1,012.78 points or 5.07%, while the China Enterprises index fell by 565.89 points or 5.58% in total. European stock markets closed down last Friday. Bank of Spain announced last Friday that the bad debt ratio of the country’s banking sector continued to reach the record high at 8.37% since August in 1994. Along with the wait-to-see attitude over the result of the G8 meeting held last weekend in Washington, which focused on the discussion of the resolution of Europe’s debt crisis, the three major European stock indices decreased. UK FTSE 100 Index closed at 5,267.62 points, down 70.76 points or 1.33%. Germany’s DAX Index closed at 6,271.22 points, down 37.74 points or 0.6%. France’s CAC 40 Index closed at 3,008 points, down 3.99 points or 0.13%. U.S. stock markets also continued its downtrend last Friday. Although the world’s largest social networking website Facebook (FB) had its first trading day on last Friday, not much stimulation was brought to the market. Instead, investors’ worries over the European debt crisis have deepened. The three major U.S. indices generally declined. The Standard & Poor’s 500 Index finally ended down by 9.64 points or 0.74% to 1,295.22 points, being the first time to fall below 1,300 points since the mid-January this year. The Dow Jones Industrial Average Index finally closed at 12,369.38 points, down 73.11 points or 0.59%. Nasdaq Index closed at 2,778.79 points, down 34.90 points or 1.24%. Although Hong Kong ADRs generally continued to decline last Friday, we expect the Hong Kong stocks to open higher this morning on the back of Premier Wen’s speech which suggesting measures to sustain China’s economic growth. The benchmark index fell and once plummeted over 550 points last Friday. However, some of its losses had been erased since the buying momentum at the low level, indicating that the investors did intend to rebuild their positions. We believe the market will subsequently turn to be positive today amid the expectations for more quantitative easing measures in Europe. Looking ahead, Euro zone and U.S. will release several economic data, including those on housing and consumption. Investors could pay more attention to such data and observe if these data will be worse than market expectation, which might deepen worries over such countries economic condition and lead to a further consolidation of the global stock market.