Hong Kong's top shares climbed on Monday as investors sought bargains after losses last week but shares in fixed line phone firm PCCW Ltd were trampled after it said it would sell its property interests.
China-related stocks were also firm despite news that Chinese leaders wanted more modest economic growth this year.
PCCW shares tumbled 7.5 percent to HK $5.55 after it said it would sell its property assets including the high-tech residential and office Cyberport development, to Dong Fang Gas Ltd for US $841 million in shares and notes. Dong Fang shares rocketed 114 58 percent to HK $1.03 on the news.
After the deal, PCCW will hold a majority stake in Dong Fang.
The Hang Seng index, which groups 33 blue-chip stocks, ended the day up 0.88 percent, or 118.78 points, at 13,573.54, after falling 3.25 percent last week.
"It looks like more of a technical rebound.
Even if people have the money, I think they are reluctant to jump into the market at these high levels' said Kitty Chain, director at Rexcapital Asset Management.
The mood was also cautions ahead of Hong Kong's budget on Wednesday and as market participants monitored movements in the US dollar.
The greenback has strengthened recently, making local assets more expensive to overseas investors.
The Hong Kong dollar is pegged to the US currency.
"People aren't expecting too much from the budget but there might be some new measures to control the budget deficit," said Kenny Tang, associate director at Tung Tel Securities.
Turnover was HK $17 billion compared with a recent average of HK $18.8 billion as the initial public offering of Semiconductor Manufacturing International Corp (SMIC) sucked up funds.
One million application forms were printed as SMIC began selling shares to individual investors on Monday in an IPO worth up to US $1.8 billion, making it the world's third largest this year.
But SMIC's IPO helped Shanghai Industrial Holdings Ltd climb 3.54 percent to HK $19. The conglomerate has a 12 percent stake in SMIC. China plays, known as H shares rose 1.09 percent to 5,088.2 after China's foreign exchange chief said a scheme that would allow Chinese investors to invest in overseas stocks could be implemented this year.
China stocks listed here are expected to be the chief beneficiaries of any such move.
Zhenhai Refining & Chemical Co Ltd, China's largest oil refinery, was the biggest gainer, rising 5.33 percent to HK $8.90.
China set a 2004 growth target of about seven percent at its annual parliamentary meeting, slower than 9.1 percent recorded in 2003 as it pledged to rein in the country's booming economy.
But many investors down played the possibility of slower economic growth in China.
Insurer PICC Property & Casualty slipped 3.73 percent to HK $3.225 and mini-car and helicopter maker Avichina lost 3 05 percent to HK $1.59 after they joined the Hang Seng China Enterprise, or H share mdcx.
The two counters had run up ahead of their inclusion.
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