The Hong Kong flag-carrier will announce its first-half 1998 interim results on Wednesday and analysts say the only question is how deeply its record of strong profits will be slashed.

Some analysts have predicted a net profit of about HK$43 million (US$5.6 million) but most forecast losses of up to HK$100 million.

And they see tougher times ahead for the airline, which has enjoyed solid profits every year since listing in 1986.

Widely blamed are intense competition from regional airlines and the tourism slump, brought about by sharply reduced consumer spending because of Asia's financial turmoil.

"The problems are mainly going to come through in the second half," said research analyst Peter Milliken at DBS Securities.

Milliken, who forecast a HK$43 million profit for the firsthalf, said Cathay could suffer a HK$200 million full-year loss in 1998 due to "its high capacity and problems at Chek Lap Kok."

Competition from other airlines and a fall in tourism have driven down Cathays passenger load factor. On an average its aircraft were only 67 per cent full between January and April, down 6.8 percentage points from the same period in 1997.

The airline, which had net profits of HK$1.69 billion in 1997 and HK$3.81 billion in 1996, suffered another setback when Hong Kong moved its air cargo terminal to Chek Lap Kok in July.

Computer problems quickly froze operations of main air cargo handler Hong Kong Air Cargo Terminals Ltd (HACTL), forcing it to place an embargo on cargo.

While HACTL is now processing more than half its usual 4,000-tonne daily throughput, the saga will cost Cathay dear. Analysts have estimated its lost cargo revenue at HK$80 million a week.

The Cathay results come at a time when Hong Kong, which reverted to Chinese rule in July 1997, is reeling from whatseems to be an endless string of bad news.

"Being a Hong Kong carrier and an employer of so many workers, Cathay is very widely watched," said chief economist Shamus Mok at the Bank of East Asia. "Its results will be an important indicator of the Hong Kong economy."

Suffering fallout from the regional crisis, thousands of people have been laid off in recent months and a host of businesses -- from small eateries, restaurants, department stores to property agents -- have closed down.

On Monday, the government estimated gross domestic product GDP had shrunk 2.8 per cent between the first quarters of 1997 and 1998, worse than its rough guess of a two per cent contraction announced on May 29.

Worse is yet to come. GDP growth in the second quarter will probably be worse than the first quarter, government economist Tang Kwong-yiu said on Monday.

On Monday, HSBC Holdings announced a first half pre-tax profits drop of 14 per cent, dragged down by a 41 per cent decline in interim net profits for unit HongKong and Shanghai Banking Corp.

Hong Kong Bank reported provisions for bad and doubtful debts of HK$5.93 billion, mainly for exposures to Indonesia and Thailand and also Hong Kong.