Hong Kong shares rose 0.8 percent on Tuesday stretching their rally into a fifth day after inflation data from China showed Beijing had ample room to cut interest rates, but turnover languished amid conflicting reports about a US rescue plan. A rally on the main index that began last week after Shanghai stocks took off on signs of a faster economic recovery in China matched its 5-day rise in the late November and early December.
China's consumer price inflation fell to a 30-month low of 1 percent in January, while producer prices were 3.3 percent lower in January than a year earlier. The data kept alive hopes for at least another rate reduction on the mainland, but fanned speculation Beijing may scale down the size of a much-anticipated interest rate cut as the drop in inflation was the smallest in nine months. "While there is room for the central bank to move rates lower it's not very important for the government any more as the economic conditions in China seem to be improving," said Alex Tang, research director with Core Pacific-Yamaichi International.
Lending at Chinese banks is expected to have risen by a record of around 1.6 trillion yuan in January, according to an industry source, higher than the 1.2 trillion yuan estimate provided by the state media earlier. Chinese bank stocks rose on Tuesday, with top lender ICBC climbing 1.1 percent and smaller rival China Construction Bank adding 1.9 percent.
The benchmark Hang Seng Index closed 111.58 points higher at 13,880. Mainboard turnover fell to HK$42.1 billion ($5.4 billion) from HK$48.5 billion on Monday amid uncertainty over the US bank bailout and the fate of the "bad bank" to buy distressed assets from commercial banks.
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