Hong Kong's leading index closed at a fresh two-and-a-half year high on Tuesday as investors scooped up property shares in anticipation of stronger earnings as the long ailing sector revives.
The benchmark Hang Seng Index ended up 2.39 percent, or 317.12 points, at 13,570.43, with the property sub-index climbing 3.99 percent to 17,776.61.
Market volume was heavy at HK$23.6 billion (US $3 billion), higher than the 20-day moving average of HK$21 billion.
Property shares, and real estate investment firms in particular, enjoyed a sizzling session as local consumer confidence slowly recovers from a six-year slump and on hopes that mainland Chinese visitors to Hong Kong will spend more money on everything from apartments to clothes.
A number of retail landlords have already raised rents as the business outlook for their tenants improves.
"I'm bullish on property stocks," said Adrian Ngan, regional head of properties at BNP Paribas Peregrine.
But he said the rally in property counters came a bit too fast, and the sector might be set for consolidation in March.
Hang Lung Properties Ltd, which owns retail spaces in the bustling Causeway Bay shopping area, rallied 5.74 percent to HK$12.90. Hysan Development Co Ltd, another major landlord in the district, leapt 12.5 percent to HK$15.75.
Investors also plunged into shares of major developer Sun Hung Kai Properties Ltd on hopes that residential sales over Chinese New Year would be robust. SHK rose 4.86 percent to HK$75.50.
After the close, the government reported that consumer prices fell for a 62nd month in December, due mainly to declining housing rents, but with retail prices picking up many economists hope the city's long deflationary trend will finally end this year, giving businesses more power to boost prices and profits.
"As inflation and confidence returns, property prices and office rentals will stage a strong recovery," said Merrill Lynch in a research note. It estimated a 25 to 30 percent rise in both residential prices and office rental in the next two years.
The stock market will be only open for the morning session on Wednesday and close on Thursday and Friday for the Lunar New Year holiday. Trade will resume on Monday.
Elsewhere, China-backed conglomerate Shanghai Industrial Holdings Ltd jumped 4.05 percent to HK$19.25 after Motorola Inc took a significant stake in its semiconductor making unit SMIC, which is due to list this year.
Brokers said Motorola's move gave a vote of confidence as the listing plans of Semiconductor Manufacturing International Corp (SMIC), had been clouded by a patent lawsuit. Shanghai Industrial has a 17 percent stake in SMIC and stands to make a big one-off gain from the listing.
H shares had a sizzling session after losing 12 percent since hitting a six year high on January 5. The H-share index of China-related shares gained 3.55 percent to 4,905.81.
"H shares are very volatile," said Yang Liu, managing director of Atlantis Investment Management (HK).
China's economy grew at a sizzling 9.9 percent in the fourth quarter of 2003 and the government said that momentum would remain strong in the current quarter.