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Monday, November 3, 1997 Published at 12:58 GMT

Despatches: Far East
Jill McGivering
From Hong Kong

The stock market in Hong Kong rallied on Monday morning, after recent weeks of dramatic losses. At the close of the morning session, the Hang Seng index had risen by almost five and a half per cent, to close at eleven 11,200 points. But the volatility is expected to continue for some time to come. From Hong Kong, Jill McGivering reports.

"The Hang Seng index began to surge from the moment of opening - in part a response to Friday's gains on Wall Street. The rally was led by the so-called Red Chip, or mainland-based companies, which are now being seen as the most stable sector of the market. The strong performance came as a relief after the last two weeks of turbulence and heavy losses, but the euphoria may be short-lived. Concern about the health of Hong Kong's property sector, which is central to the local economy, is deepening. The increase in interest rates, which has helped to defend the Hong Kong dollar is already taking its toll on property and land values. Some analysts are now predicting that some property prices could fall by as much as 20% by the end of the year. There are also fears of a renewed atttack on the Hong Kong dollar by currency speculators. Yesterday, Hong Kong's finanacial secretary, Donald Tsang, said the Government was reviewing its method of defending the Hong Kong dollar with the threat of second attack in mind. The present strategy was fundamentally sound, he said, but the Government did have lessons to learn from the events of recent weeks."

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Middle East
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