Hong Kong stocks snapped a 3-day losing streak to rise 0.4 percent on Monday, buoyed by strong banking stocks on rate hike expectations and on a bullish outlook for upcoming earnings reports.
Recently-listed Bank of Communications was among the top gainers and was the most actively traded stock after an HSBC executive told a British newspaper that it will seek permission to increase its 19.9 percent stake in the bank.
Bank of Communications rose 6.4 percent to HK$3.32, after tapping an intraday record high since the firm listed in a high profile IPO in June.
Hang Seng heavyweight HSBC Holdings Plc rose 0.3 percent to HK$127.90 as investors factored in a US rate hike later this week.
Hong Kong banks are widely expected to follow a US rate increase.
"Investors are expecting another 25 basis points rate hike in the US this week and banks in general will benefit from the rising interest rate spread," said Alex Tang, research director at Core Pacific Yamaichi International.
The blue chip Hang Seng Index ended 0.38 percent, or 57.62 points, higher at 15,108.94. Volume was below recent averages with HK$18.7 billion (US$2.4 billion) worth of shares changing hands. Traders said the market was also supported by rosy corporate earnings expectations. Blue chip firms China Mobile (Hong Kong) Ltd, Lenovo Group, Swire Pacific Ltd and Li & Fung Ltd are all due to report results this week.
China Mobile, the world's largest mobile carrier by subscribers, rose 0.47 percent to HK$32.20 with investors anticipating first half earnings growth of 15-20 percent on Wednesday.
Large cap China oil plays also outperformed thanks to a spike in US crude oil prices to fresh record highs on a host of US refinery outages and heightened worries over geopolitical risk.
China's largest offshore oil producer CNOOC Ltd was the top blue chip performer, up 3.77 percent to HK$5.50.
China's largest oil producer PetroChina Co Ltd gained 2.17 percent to HK$7.05.
Shares in container shipper Orient Overseas (International) Ltd (OOIL) fell 7.67 percent to HK$34.90 on concerns that high fuel prices and other costs will trim its profits.
The liner reported an expected 15 percent increase in first-half net profit on Friday. J.P. Morgan cut its 2005 full year estimate for the company by 8 percent to US$771 million after the results but maintained an "overweight" rating. The market shut before London-headquartered but Asia-focused bank Standard Chartered reported a better than expected 20 percent rise in first half pre-tax profits.
Hong Kong-traded Standard Chartered shares rose 1.3 percent to HK$161.90 ahead of the earnings report.
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