HK market kept rising last week and reached "overbought" territory. So, HK market might see correction in principle. However, we could see many sectors continuing to surge. Particularly, China related shares benefited from good performance in A-share market. That drove HSI and HSCEI to surge. We expect that HK market will maintain at an "overbought" situation. That will drive HSI to approach 20,900. Once HSI breaks that level this week, we believe that HK market will see a pull-back and retreat up to 20-day MA to resolve "overbought" situation. However, the mid-term movement of HK market is still healthy. With the short-term "overbought" situation, the weekly volatility of HSI will expand. However, the U.S. market rebounded over 100 points and broke the previous peak last Friday. That may help HSI to reach 21,000. So, the weekly fluctuation of HSI will be within the range of 19,500 to 21,000. Daily turnover of HK market can maintain at HK$60bn on average.

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Conclusion:
The short-term volatility is still high as the fear of Euro debt crisis has not eased yet. With the extension of ultra-low interest rate to the end of 2014 in the U.S., it showed that the economic recovery in the U.S. was not optimistic. So, we expect that HK stock market will be mixed in short to medium-term. Though A-shares market started rebounding currently, the whole market situation is cautious only. So, we updated our view on different sectors. We are not optimistic about the HK banking sector. Particularly, the interest margin continued to narrow. They will face different challenges. That's why we downgraded the local banking sector to "Neutral". Even though the China economic growth keeps demand for coal rising, CDRS announced to restrict the price surge in spot price of coal that limited the growth of the whole sector. We believe that the era for speedy growth in coal sector has gone and we maintain the rating of the coal sector as "Neutral".

Besides, the huge amount of property trust issued by China property players will mature this year. Though it will not affect the China property stocks listed in HK much, the pressure on China property stocks listed in A-shares market may spill out to have negative impact on China property players listed in HK. So, the performance for whole sector will be mixed and we maintain our "Neutral" view on China property sector. With the home appliance to rural area subsidy program imposed for three years, it cannot help to improve the profitability of the home appliance enterprises. We expect that once the subsidy program ends, it will hurt the profit and margin of the whole industry. So, we believe that the rating of the home appliances industry is "Neutral" too. Among different sectors, we are optimistic about the internet related industry and Tencent Holdings (700 HK) is our top-pick as their new business will become their growth engine. Our target price is at HK$206 and has 8.6% upside compared with the closing price at HK$189.7 on Jan31.

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