Hong Kong stocks recouped early losses to close 1.2 percent higher on Wednesday after a sharp rebound in Shanghai on speculation that Beijing will soon allow state-set prices for oil products, such as gasoline, to rise. China's key stock index jumped 2.93 percent after Sinopec leapted its 10 percent daily limit and PetroChina surged 6.6 percent in Shanghai.
A raft of speculation - from Beijing preparing to allow oil product prices to rise and increasing government subsidies to oil refiners to loosen windfall taxes - boosted sentiment on the sector and helped to lift the markets.
Sinopec, Asia's largest refiner, finished up 4.3 percent and PetroChina gained 2.2 percent in Hong Kong. However, these measures, if they materialise, may help narrow losses in the oil processing sector but should not be enough to help it to return to profitability, said Alex Tang, research director at Core Pacific-Yamaichi International.
The benchmark Hang Seng Index erased a 1.36 percent opening loss to close the day up 1.16 percent at 25,460.29. The China Enterprises Index of Hong Kong-listed companies, or H shares, finished 1.15 percent higher.
Mainboard turnover eased to HK$79.23 billion ($10.16 billion) from HK$82.8 billion on Tuesday. China's top offshore oil and gas producer, CNOOC, topped the blue chip list of gainers and most active stocks to close up 5.9 percent. The company, which has limited processing business, will benefit from record oil prices.
Oil refiners are operating in deep losses as the gap between international oil prices and controlled domestic product prices keeps widening. Lenovo, the world's No 4 PC maker, rose 3.1 percent ahead of its quarterly results due on Thursday. Brokers said record oil prices had heightened fears over global inflation and worries about the impact of China's devastating earthquake could also start to unnerve investors.
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