Hong Kong-listed shares are likely to remain mired around four-month lows this week, with China plays looking especially skittish as the country moves to rein in its breakneck pace of economic growth.
Investors will keep an eye on Wall Street for clues on US interest rate policy. Hong Kong rates track US credit policy as the local currency is pegged to the greenback.
Unemployment and inflation data due later this week will show how the city's fledgling economic recovery is faring.
Hong Kong's benchmark Hang Seng Index lost 3.5 percent last week, hitting a four-month low, rattled by concerns the United States would raise interest rates soon as the economy picks up. The Hang Seng, which closed Friday at 12,458,38 points, has lost 0.93 percent this year, making it one of Asia's poorest performing markets.
US Federal Reserve Chairman Alan Greenspan is scheduled to speak on the economy before US Congress on Wednesday and investors will listen closely for any hints on rates.
"I don't think we're in a bear market again, but it's definitely a correction phase. We should trade between 12,000 to 12,600 (points), but the bias is on the downside," said Alex Wong, a director of Rexcapital Asset Management.
China Life Insurance Co Ltd, which raised US $3.5 billion in 2003's biggest share offering, will unveil its 2003 earnings on Friday.
A class action lawsuit by US shareholders accusing it of not adequately disclosing an audit by Chinese authorities has weighed on the firm's shares, which closed at HK$4.875 on Friday. The stock has dropped 25 percent this year.
Brilliance China Automotive Holdings Ltd, the Chinese partner of German luxury carmaker BMW, reports 2003 earnings on Thursday, offering investors a snapshot of China's much-hyped auto sector.
The Hang Seng China Enterprise Index, which groups Chinese firms listed in Hong Kong, or H shares, dived seven percent last week to 4,693.76 as China moved to rein in economic growth by hiking bank reserve requirements to curb lending.
The government fears certain sectors of the economy are overheating due to excessive investment.
Firms in the commodity and raw material sectors, such as Aluminium Corp of China (Chalco) and steel maker Angang New Steel Co Ltd, are likely to be hardest hit, analysts said.
Hong Kong will release first quarter 2004 unemployment numbers on Thursday and the March consumer price index, a gauge of inflation, on Friday.
Hong Kong's economy is expected to grow six percent this year, bouncing back from recession last year, but the benefits are taking time to filter through and the territory still has one of Asia's highest unemployment rates at 7.2 percent.
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