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Hong Kong shares recovered from a 26-month low to close flat on Thursday, helped by late buying in Chinese stocks following a co-ordinated effort from global central banks to ease a funding squeeze in money markets. The blue chip index at one point slid as much as 7.7 percent as investors dumped Chinese financial stocks amid a crisis of confidence in global financial markets.
"The slide in the morning was ridiculous and the sell-off in some stocks in particular was irrelevant and irresponsible. The weak sentiment was partly to blame but people were mostly just following the Chinese markets," said Peter Lai, director with DBS Vickers.
The benchmark Hang Seng Index closed 4.73 points lower at 17,632.46 after dropping to 16,283.72 in the morning session. The index has slumped 15 percent in seven straight days of losses, taking year-to-date declines to almost 37 percent.
Mainboard turnover rose to HK$102.2 billion ($13.1 billion), its largest since April, from HK$76.2 billion at mid-day on Wednesday. European markets and those still open in Asia rallied after top global central banks said they will pump more than $180 billion in extra funds into world money markets to ease the funding squeeze triggered by the upheaval on Wall Street.
"The Hang Seng Index has fallen 4,000 points in just 17 days so it was in a heavily oversold condition. While a lot depends on how overseas markets hold up tonight, we are likely to have bottomed at 16,300 in the near term," said Patrick Yiu, associate director with CASH Asset Management. The China Enterprises Index of top locally listed mainland Chinese firms ended down 0.4 percent.
The index had fallen over 10 percent earlier today tracking steep 6.5 percent drop on the Shanghai bourse but was lifted off lows as the Shanghai market bounced back to close 1.7 percent lower. The world's largest wireless carrier, China Mobile, finished up 4.3 percent at HK$73.20 after hitting a 17-month low of HK$66 earlier today.
China Unicom gained 10.8 percent after its proposed merger with China Netcom was approved by shareholders of both companies on Wednesday. Fixed-line service operator China Netcom advanced 6.8 percent. The merger, which is expected to bolster Unicom's presence in the wireless telephony market and create a stronger rival for market leader China Mobile, will become effective on October 15, 2008.
Gold miners surged following a record rally in the price of the precious metal due to heavy safe-haven buying as outlook for global equity markets remained bleak. Spot gold jumped more than $86 an ounce on Wednesday and was trading around $865 an ounce on Thursday.

Copyright Reuters, 2008

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