Hong Kong stocks gained over two percent in active trade on Wednesday spurred by market soothing comments from Fed chief Chairman Alan Greenspan and solid earnings from top US technology companies.
"Everything is more clear now. US interest rates will be going up steadily but in an orderly manner," said Francis Lun, general manager at Fulbright Securities.
Hong Kong interest rates tend to move in tandem with those of the US due to the local currency being pegged to the US dollar and strong trade ties.
Exporters, property developers and banks all gained ground with mini motor maker Johnson Electric Holdings China sourcing firm Li & Fung and property heavy conglomerate Wharf Holdings leading the winners column.
China Semiconductor Manufacturing was also boosted after positive earnings from US technology heavyweights Motorola Inc and Texas Instruments.
The Hang Seng Index ended up 2.24 percent, or 271.48 points, at 12,395.11.
Trading volume was above recent averages with HK $14.5 billion (US $1.86 billion) changing hands. Greenspan told senators that US economic growth remains solid and inflation posed no threat, with interest rates likely to rise at a "measured" pace.
The Fed Chairman is due to speak again later on Wednesday in the second part of his semi-annual address to Congress.
Rate sensitive property stocks were particularly perky after Greenspan's speech.
Property heavy conglomerate Wharf Holdings, which owns shopping malls in key tourist districts, gained 4.07 percent to HK $24.30 while Wheelock and Co Ltd rose 4.12 percent to HK $10.10.
Cheung Kong (Holdings) Ltd, one of the city's largest property firms, gained 3.93 percent to HK $59.50.
Hong Kong's number three property firm Henderson Land Development Co Ltd gained 2.69 percent to HK $34.30 despite a broker's downgrade cutting the firm to "reduce" from "hold", citing missed attempts to replenish its land bank.
Banks also performed strongly with index heavyweight and global bank HSBC Holdings rising 1.3 percent to HK $116.50. Bank of China's Hong Kong arm BOC Hong Kong (Holdings) Ltd rose 2.66 percent to HK $13.50.
China enterprise stocks, better known as H-shares, under-performed blue chips, rising 0.96 percent to 4,435.98
Oil prices also remain above the psychologically key level of US $40 a barrel on concerns about world supply. Hang Seng-listed state oil firm CNOOC Ltd rose 3.55 percent to HK $3.65.
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