Hong Kong shares -- 2 (future movements up to U.S. mkt performance: analyst)

At 11:30 am, the Hang Seng Index was up 220.00 points at 13,679.18 on turnover of 3.35 bln hkd, while the Hang Seng May contract last traded at 13,720 points.

	    Chu Siu Wah, head of research with G.K. Goh Securities, said the weighting reduction due to the free float adjustments had been expected by the market for about nine months or so.

	    "Most fund managers have done their portfolio changes. The performance of the local market will depend on the movements of U.S. equity markets," Chu said.

	    While the market is hoping the U.S. Fed will cut interest rates again in June, Chu said that after the reduction of 250 basis points since the beginning of the year, there is limited room for further aggressive interest rate cuts.

	    "The market is watching whether inflationary pressure will pick up (after the constant rate cuts). But, the effect of the constant rate cuts is expected to emerge in the second half of this year and it is a positive side to the equity market," Chu said.

	     Among interest rate sensitive stocks, HSBC rose 1.25 to 98.75 hkd and Hang Seng Bank gained 1.00 to 89.50.

	     Cheung Kong rose 0.25 to 92.75, Sun Hung Kai Properties gained 1.50 to 77.50, Henderson Land rose 0.40 to 37.00 and New World Development added 0.10 to 10.20.

	    China Unicom fell 0.25 to 11.75, while China Mobile gained 1.10 to 39.50.

	    Hutchison Whampoa rose 1.50 to 86.75, while Pacific Century CyberWorks fell 0.025 to 2.75.

	    Lai of OCBC Securities said he expects China related stocks will continue to be attractive to investors on the back of China's fast growing economy.

	    China Aerospace rose 0.04 to 0.79, China Travel gained 0.03 to 1.68, China Overseas added 0.03 to 1.23 and CNOOC rose 0.15 to 8.15 after MSCI said they will be included in its China index, dealers said.

	    China Eastern Airlines fell 0.01 to 1.29 and Sinopec shed 0.02 to 1.48. MSCI announced both will be included in its China index.

	    On the GEM board, tom.com was unchanged at 2.175, while Sunevision rose 0.02 to 1.78.

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