Hong Kong's top share index hit a seven-month high on Monday, with both blue chips and China stocks gaining ground as markets rallied throughout the region.
Hong Kong's blue chip Hang Seng Index closed up 1.82 percent, or 239.22 points, at 13,359.25, its highest level since March 9.
Turnover was a heavy HK$22.4 billion compared with HK$15.42 billion on Thursday as funds put money into equities at the beginning of the fourth quarter and traders covered short positions - a way of betting that a stock will fall.
"We are seeing investors moving back into the region. There's the sense that the global economy is stronger than expected," said Mark Konyn, CEO at Allianz Dresdner Asset Management.
Investors also took heart from a strong performance on Wall Street on Friday and as oil prices eased. The Hang Seng was closed on Friday for a public holiday.
China stocks also closed sharply higher despite Beijing holding firm to its gradual approach towards more foreign exchange flexibility during meetings with top officials from the rich G7 nations on Friday.
Traders said that keeping the currency at current levels would enable China to maintain its export competitiveness and higher raw materials prices were boosting counters such as Aluminium Corp of China Ltd (Chalco).
Chalco rose 6.93 percent to HK$5.40 after it said that it had raised spot sales prices of alumina by about five percent.
China Shipping Development rose 9.02 percent to HK$7.25 and Angang New Steel rose 4.76 percent to HK$3.85.
Others said that China is unlikely to implement new measures to cool its economy, easing fears about corporate profits.
"H-shares seem to have been sold down and there has been much concern about hard landing prospects and we would suggest that that's been overplayed," Konyn added.
China enterprise stocks, also known as H-shares, rose 2.75 percent to 4,777.42, hitting their highest level since April. Blue chips were also firm.
The property sub index rose 2.06 percent, with Cheung Kong Holdings Ltd up 2.62 percent to HK$68.50 and retail landlord Wharf Holdings Ltd climbing 4.0 percent to HK$27.30.
Denway Motors, the Chinese partner of luxury car maker BMW AG, was the top blue chip gainer, up 5.77 percent to HK$2.75.
While some market participants were confident on the fourth quarter outlook, traditionally a strong period for Hong Kong, others were more cautious.
"The market has risen too quickly with people covering short positions," said Andrew To, sales director at Tai Fook Securities. Telecoms-to-ports conglomerate Hutchison Whampoa Ltd rose 2.05 percent to HK$62.25. Traders said investors were buying the stock after Li Ka-shing again increased his stake in the firm, signalling to some investors that he views the stock as undervalued.
Li, Asia's richest businessman, spent about HK$314 million on three lots of shares between September 24 and September 28, boosting his stake to 50.86 percent, stock exchange filings showed.
Lianhua Supermarket Holdings Co Ltd, China's largest supermarket operator, was suspended from trade during the morning session.
It is selling HK$303.6 million (US $38.9 million) worth of new shares, banking sources said on Monday, taking advantage of investor enthusiasm for the mainland's fragmented retail sector. Its shares rose 2.7 percent to HK$9.50 prior to the suspension.