Hong Kong share prices closed 4.6 percent higher on Thursday, as heavyweight HSBC inspired a post-Lunar New Year holiday buying spree, dealers said. The benchmark Hang Seng Index closed up 575.83 points at 13,154.43 after trading between 13,109.27 and 13,560.07 during the session. Turnover was 39.15 billion Hong Kong dollars (5.02 billion US).
Hong Kong's financial markets were closed Monday to Wednesday for the Chinese New Year public holiday. Heavyweight HSBC led the blue chip gainers on short-covering as it had fallen 22 percent between the start of the year and Friday on worries that it may need to raise extra capital. Gains in HSBC's London-traded shares also boosted the local stock.
HSBC ended at the equivalent of 64.36 dollars in London overnight, 12.0 percent higher than its Friday close in Hong Kong. On Thursday, HSBC rose 9 percent in Hong Kong to 62.60 dollars. Sun Hung Kai Research strategist Castor Pang said the rebound in the bank was likely to be short term.
"There are two key overhangs on HSBC," Pang told Dow Jones Newswires, "the possible need for a rights issue and expectations of a dividend cut won't disappear any time soon." HSBC will report its 2008 results on March 2, which could provide clues on any fund-raising or future dividend policy plans, he said. Gains on Wall Street Wednesday also helped boost the local market.
The Dow Jones Industrial Average ended 2.5 percent higher on hopes the Obama administration will revive a plan to remove bad assets from banks' balance sheets. US stocks were also bolstered by hints from the Federal Reserve that it may buy long-dated Treasury bonds to ease credit conditions, among other measures.
"The jumps in the Hang Seng Index were spurred by a flurry of short-covering, but it's too early to say how sustainable the rally will be," YK Chan, a strategist at Phillip Asset Management said. He suggested 14,000 as the index's near-term rebound target.
Chan said investor sentiment had improved recently, but whether the economic picture has become any better is questionable. Bargain hunting also boosted blue chips. China Mobile rose 2.3 percent to 70.00 dollars after falling 9.1 percent since January 12. China Construction Bank ended 6.0 percent higher at 3.91 dollars after it lost 13 percent since the start of the year.
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